Part B

Question 1

explain how a randomised controlled trial works

Answer 1

group of patients,
random assignment into treatment group or control group,
follow up to compare results

Question 2

what bit is crucial in the randomised controlled trial (RCT)

Answer 2

the random assignment

Question 3

what is the basic selection problem in food stamps

Answer 3

cannot just compare recipients with non-recipients as they are different,
income, household consumption

Question 4

does the basic selection problem with food stamps (can’t just compare recipients with non-recipients) go away if you control for income and household composition

Answer 4

even if you just focus on eligible, not everyone receives food stamps (20% eligible don’t),
can’t just compare eligible recipients with eligible non-recipients because they are different, self-selected group selection on unobservable factors likely to be correlated with spending outcomes

Question 5

what is internal validity

Answer 5

statistical inferences about causal effects are valid for the population being studied

Question 6

what is external validity

Answer 6

statistical inferences about causal effects can be generalised from the population and setting studied to other populations and settings

Question 7

what are some features of internal validity for whitmore study

Answer 7

fewer assumptions than DiD,
random allocation into treatment and control groups,
test that characteristics the same across the two groups

Question 8

talk about external validity in terms of laboratory experiments

Answer 8

controlled environment to study behaviour,
may be unrepresentative population (students),
arguably artificial setting

Question 9

talk about external validity in terms of field experiments (= randomised controlled trials)

Answer 9

natural setting and relevant population,
arguably limited scale (compared to genuine policy change),
issue if people know they are in an experiment (will they behave differently because they are in an experiment and will they expect the experiment to last)

Question 10

talk about the methodology of Whitmore

Answer 10

randomised controlled trials (RCTs) run in San Diego (14 months) and Alabama (8 months) in early 1990s,
cash out experiment,
half eligible households received stamps as usual, half received cash,
then compares stamp infra-marginal (distorted) with check infra-marginal (distorted)

Question 11

why are eligible recipients different with non-eligible households

Answer 11

recipients different,
low income households,
more likely to have children

Question 12

why is it difficult to compare eligible recipients with eligible non-recipients

Answer 12

is a better strategy (than recipients to non-eligible),

self-selected group with selection on unobservable factors likely to be correlated with spending outcomes

Question 13

what is the selection problem for eligible recipients vs eligible non-recipients

Answer 13

some selection process where everyone who’s eligible decides whether to apply for the benefit or not and this selection process is linked to the type of factors that are going to matter for how much they spend on food

Question 14

what is exogeneity problem

Answer 14

treatment is determined by factors that do not affect the outcome of interest

Question 15

p value in whitmore

Answer 15

probability that these outcomes will be generated under the null hypothesis,
probability that two are actually the same

Question 16

how does Whitmore know who’s distorted and who’s infra-marginal

Answer 16

observe food stamp level (value of food stamps),

distorted if they spend less than or equal to the value of the food stamps plus $5 (to allow for rounding)

Question 17

what is the other way of finding out what proportion are distorted (not observe level and if spend less distorted)

Answer 17

all based on how much food would they spend if given cash,
because random selection two groups should have same distribution of food spending so look in cash group and find percentage (say 25%) distorted, therefore know that bottom 25% in terms of food spending are also distorted

Question 18

what percentage of distorted households do both methods of finding proportion of distorted find

Answer 18

both approaches give around 20% distorted and 80% infra-marginal

Question 19

what two experiments does the abeler and marklein paper have

Answer 19

field experiment - german restaurant,

lab experiment - german students in computer lab at university

Question 20

explain setup of both experiments in abeler and marklein

Answer 20

budget consists of cash endowment (own money in restaurant and given chance to earn money for lab),
also given additional “grant”,
interested in effect off giving a grant in cash compared to if grant given targeted at one of the goods,
level of targeted grant set such that consumers are infra-marginal (non-distortionary)

Question 21

talk about the setup of the restaurant experiment in abeler and marklein

Answer 21

wine restaurant in Southern Germany,
goods=food and drinks,
additional grant= 8 euro voucher presented to guests on arrival to be spent on that day,
two treatments + baseline (three groups of restaurant goers) - cash treatment (gourmet voucher used to reduce overall bill), label treatment (gourmet beverage voucher for drinks), additional baseline (no voucher)

Question 22

results of average spent for field experiment abeler and marklein *

Answer 22

label treatment increases spending on labelled good compared to cash treatment,
overall spending higher than under cash treatment,
consumers are infra-marginal, so difference between cash and label treatment are evidence of behavioural effect (because economic theory says they should act the same as they are both infra-marginal)

Question 23

how is the treatment decided for the restaurant experiment abeler and marklein

Answer 23

it is done on a day to day basis

Question 24

what are the strengths of the lab experiment compared to the field experiment for abeler and marklein

Answer 24

random allocation across individuals (not by day),
control over background factors,
control over experiment design

Question 25

what is the design of the lab experiment for abeler and marklein

Answer 25

game involves allocation of budget (income and additional grant) between two goods,
random allocation of students into cash group (control) and label group (treatment),
student earns 50 points of initial income through a mundane task,
stage 1 allocation of income,
grant given as cash or as targeted benefit that can only be spent on one of the goods,
stage 2 allocation of income