Natural Experiment Research Articles

The impact of law on moral and social norms: evidence from facemask fines in the UK

AbstractWe measure the extent that a prevailing law can affect moral and social norms. We use variations in facemask fines in the UK during the COVID-19 pandemic as a case study, as it presents us with many features of a natural experiment. Our analysis provides two important findings. First, we find that the legal status of a behaviour, that is whether the behaviour is illegal or not, is important in influencing stated compliance and moral and social norms. In contrast we find no evidence that a variation in penalties has any effect on stated compliance or moral or social norms. We consider these results are important for law makers and society, as both moral and social norms are known to be important drivers of social change, and our results show that legality influences both—thus highlighting an endogenous relationship between the law—and moral and social norms.

Explaining Rural Conservatism: Political Consequences of Technological Change in the Great Plains

Rural areas are conservative electoral strongholds in the United States and other advanced capitalist economies. But this was not always the case. What explains the rise of rural conservatism? This paper argues that technological change transformed not only agriculture but rural political preferences during the twentieth century. It studies a natural experiment: the post-World War II introduction of new irrigation technologies, which enabled farmers to irrigate otherwise arid land in the Great Plains using groundwater. Difference-in-differences analyses exploiting the shock’s differential impact on counties overlying the Ogallala Aquifer—a pattern validated with remote-sensing data—show that technological change contributed significantly to the region’s long-term conservative electoral transformation. Additional analyses, including comparison of individual policy preferences inside/outside the Ogallala Aquifer boundary, suggest that this was due to the rise of capital-intensive agriculture and the growing power of agribusiness. The findings demonstrate how new technologies made new politics in rural America.

Import Penetration and Corporate Misconduct: A Natural Experiment

Import Penetration and Corporate Misconduct: A Natural Experiment

Global Versus Regional Carbon Taxation: Exploring a Natural Experiment

The reduction of global greenhouse gas emissions has priority due to climate change. Scientists across disciplines promote carbon taxation or carbon pricing as an instrument to mitigate the negative externality of fossil energies. We exhibit two insufficiencies of today’s regulatory policy by utilizing a novel natural experiment. First, carbon taxation is only effective if it is implemented on a global scale because fossil energy markets and emissions are cross-border and global. Second, carbon taxation is based on an extrinsic mechanism and does not alter intrinsic behaviour sustainably. Our applied theory and modelling approach is corroborating these findings. The present regulatory approach is doomed to fail due to overambitious European countries and unambitious (partly realistic) rest of the world. Our interdisciplinary analysis unravels a new agenda to achieve the essential aim. What is needed is a global climate club, as proposed by Nobel Laureate William Nordhaus, with a least but global greenhouse gas reduction.

A traffic-induced shift of ultrafine particle sources under COVID-19 soft lockdown in a subtropical urban area

During the unprecedented COVID-19 city lockdown, a unique opportunity arose to dissect the intricate dynamics of urban air quality, focusing on ultrafine particles (UFPs) and volatile organic compounds (VOCs). This study delves into the nuanced interplay between traffic patterns and UFP emissions in a subtropical urban setting during the spring-summer transition of 2021. Leveraging meticulous roadside measurements near a traffic nexus, our investigation unravels the intricate relationship between particle number size distribution (PNSD), VOCs mixing ratios, and detailed vehicle activity metrics. The soft lockdown era, marked by a 20–27% dip in overall traffic yet a surprising surge in early morning motorcycle activity, presented a natural experiment. We observed a consequential shift in the urban aerosol regime: the decrease in primary emissions from traffic substantially amplified the role of aged particles and secondary aerosols. This shift was particularly pronounced under stagnant atmospheric conditions, where reduced dilution exacerbated the influence of alternative emission sources, notably solvent evaporation, and was further accentuated with the resumption of normal traffic flows. A distinct seasonal trend emerged as warmer months approached, with aromatic VOCs such as toluene, ethylbenzene, and xylene not only increasing but also significantly contributing to more frequent particle growth events. These findings spotlight the criticality of targeted strategies at traffic hotspots, especially during periods susceptible to weak atmospheric dilution, to curb UFP and precursor emissions effectively. As we stand at the cusp of widespread vehicle electrification, this study underscores the imperative of a holistic approach to urban air quality management, embracing the complexities of primary emission reductions and the resultant shifts in atmospheric chemistry.

Effective Tax Rates and Firm Size under Turnover Tax: Evidence from a Natural Experiment on SMEs

Abstract Taking advantage of Romania’s compulsory and unique presumptive tax system (turnover tax) for the smallest of the small- and medium-sized enterprises (SMEs), which unequivocally allows grouping the companies into two subsamples according to their tax status (the smallest of the SMEs, i.e. micro-companies for tax purposes, subject to alternative turnover tax vs larger SMEs subject to regular profit tax), the papers compute and compare three versions of firm-specific effective tax rates and brings first-time empirical evidence on the effects of turnover taxation on corporate tax burden. The results show not only that in Romania, the turnover tax is now the prevailing tax system, massively displacing the profit tax, but also it is more burdensome in terms of taxes actually paid relative to the firm size. Moreover, turnover taxation means that taxes are due irrespective of the profitability of a company, making the share of companies who paid taxes despite having losses much higher for micro-companies than for larger SMEs, which translates into higher public finance receipts, at the cost of lower tax equity. Since the corporate tax burden triggered by turnover taxation remains under the radar of even the most qualified policy reports, the results offer relevant lessons for other jurisdictions and have valuable policy implications.

Political connections and zombie firms: The role of the 2008 stimulus plan in China

This paper explores the impact of political connections on zombie business in the presence of massive economic stimulus. Although a stimulus plan may substantially ease financial constraints for a politically connected firm, it distorts the firm’s decision regarding market exit. Exploiting China’s 2008 stimulus package as a semi natural experiment, we show that a firm with political connections is more likely to become a zombie following such stimulus measures. Further analysis indicates that the zombification impact of the stimulus plan is more pronounced for the firms operating in the key industries targeted by the stimulus package.

Green Public Finance and “Dual Control” of Carbon Emissions: New Evidence from China

In response to the escalating global climate change, countries are progressively adopting green public finance as a crucial instrument for achieving carbon neutrality. This study considers energy conservation and emission reduction (ECER) in demonstration cities’ construction as a natural experiment and verifies the effect of green public finance on total carbon emissions (TCEs) and carbon emission intensity (CEI) by using a difference-in-differences (DID) model with the help of the panel data of 276 Chinese cities from 2006 to 2019. The empirical results indicate that (1) the ECER policy effectively reduces CEs in the demonstration cities, resulting in a reduction of TCEs by 13.13% and CEI by 12.90%; (2) the ECER policy can help optimize energy structure, accelerate green technology innovation, and improve energy efficiency, thus promoting “dual control” of CEs; and (3) the CE reduction effect of the ECER policy is stronger in western cities, southern cities, lower-administrative-level cities, and cities with weaker financial strength, which has a typical “supporting the weak” effect. Based on this, we conclude that green public finance is conducive to promoting “dual control” of CEs. Our conclusions not only enrich the theoretical research on green public finance but also provide governments with empirical evidence to implement more effective green public finance policies and expedite carbon neutrality.

Volcanic eruptions and tourism prosocial consumption

This paper exploits a recent natural experiment to analyze the effect of volcanic eruptions on tourism expenditure. Using a Difference-in-Differences methodology, we find that volcanic eruptions have a positive impact on tourism expenditure, both aggregate expenditure and expenditure by category, and both during the eruption and the post-eruption period. We investigate the mechanisms behind the increase in expenditure and obtain strong support for the empathy mechanism, prevailing over other mechanisms such as changes in prices, the profile of tourists, or simply curiosity. Our results suggest that tourist empathy with the affected community manifests through consumption, finding that prosocial consumption increases in the cultural identification of the tourist with the affected area.

Punished for Success? A Natural Experiment of Displaying Clinical Hospital Quality on Review Platforms

The healthcare market struggles with information asymmetry, limiting patients’ ability to make informed hospital choices. Aiming to bridge this gap, review platforms like Yelp have begun displaying hospitals’ clinical quality data alongside consumer reviews. However, our research uncovers that Yelp’s introduction of maternity care clinical quality measures unexpectedly resulted in lower subsequent Yelp ratings for high-quality hospitals with insufficient staffing. Employing precise foot traffic data and transfer deep learning, we discovered that high-quality, yet understaffed, hospitals experienced a surge in patient volume, which strained their resources and diminished patient satisfaction, leading to negative reviews. This finding has significant implications, signaling the unintended consequences of revealing clinical quality measures, including potential financial losses for hospitals because of reduced federal funding. This research not only contributes to our understanding the dynamics of patient satisfaction but also, offers actionable insights for high-quality hospitals to mitigate the negative impacts of unexpected visibility on review platforms. Our research underscores the importance for patients to discern between objective clinical quality measures and self-reported subjective ratings in their decision-making process. This research applies machine learning and transfer deep learning techniques to healthcare analytics, offering a deeper understanding of the interplay between information disclosure, online reviews, patient satisfaction, and hospital management.

Developers’ leverage, capital market financing, and fire sale externalities✰

Leveraged developers facing rollover risk are more likely to engage in fire sales. Using COVID-19 as a natural experiment, we find evidence of fire sale externalities in the Thai condominium market. Specifically, properties resold by developers with higher leverage ratios are listed at lower prices. This trend is evident for listed developers, who have access to capital market financing, but not for unlisted developers, who primarily rely on bank financing. We attribute this difference to the flexibility offered by bank loan renegotiation as opposed to the rigidity of debt capital market repayments. This observation highlights the pivotal role of commercial banks in financial intermediation, especially in the presence of information asymmetry.

Effect of foreign direct investment on firms' pollution intensity: evidence from a natural experiment in China

Abstract This paper examines a causal relationship between foreign direct investment (FDI) and firms' pollution intensity by exploiting the policy of China's FDI access relaxation in 2002. The result shows that FDI leads to a significant reduction in firms' pollution intensity. The mechanism tests find that FDI reduces pollution intensity by increasing firms' productivity, pollution management abilities, and the output of lightly polluting firms. The effect primarily acts on firms in lightly polluting industries and firms in the eastern region. The findings support the pollution halo hypothesis and provide implications for developing countries like China by evaluating the effectiveness of policies to attract FDI.

Performance Evaluation of Economic Relocation Effect for Environmental Non-Governmental Organizations: Evidence from China

Abstract In this article, an economic natural experiment in China is analyzed and the performance evaluation of the economic relocation effect of informal environmental regulations imposed through the channel of environmental nongovernmental organizations (ENGOs) is suggested. ENGOs are found to have a significantly negative impact on the overall economic location quotient of six major polluting industries. The economic relocation effect from ENGOs exhibits industrial and regional heterogeneity, as the effect is stronger among easy-to-relocate industries and in market-oriented areas. The underlying mechanism is the ENGOs, as informal environmental regulations could motivate firms to enhance their investment in environmental governance, ultimately crowding out these economically polluting industries.

Size matters: Natural experiments suggest the dear enemy effect is moderated by pack size in African wild dogs.

Remote monitoring of communal marking sites, or latrines, provides a unique opportunity to observe undisturbed scent marking behaviour of African wild dogs (Lycaon pictus). We used remote camera trap observations in a natural experiment to test behavioural scent mark responses to rivals (either familiar neighbours or unfamiliar strangers), to determine whether wild dogs exhibit the "dear enemy" or "nasty neighbour" response. Given that larger groups of wild dogs represent a greater threat to smaller groups, including for established residents, we predicted that the overarching categories "dear enemy" vs. "nasty neighbour" may be confounded by varying social statuses that exists between individual dyads interacting. Using the number of overmarks as a metric, results revealed an interaction between sender and receiver group size irrespective of familiarity consistent with this prediction: in general, individuals from large resident packs overmarked large groups more than they overmarked smaller groups, whereas individuals from smaller packs avoided overmarking larger groups, possibly to avoid detection. Monitoring a natural system highlights variables such as pack size that may be either overlooked or controlled during scent presentation experiments, influencing our ability to gain insights into the factors determining territorial responses to rivals.

FAMILY HISTORY OF PSYCHOLOGICAL DISORDERS MODERATES THE ASSOCIATION BETWEEN PRENATAL MATERNAL STRESS AND RISK OF AUTISM

The increase in number of cases with autism spectrum disorder (ASD) requires further investigation to the etiology of it, which is not fully understood. It is suggested that children who are vulnerable to psychological disorders more likely to develop ASD when experience prenatally stress than children who do not. The researcher sought to conduct a natural experiment by collecting data from a sample derived from population lived in a region that experienced number of the worst civil wars in Libya. The sample consisted of 38 parents of children with ASD and 40 parents of typical children living in south Tripoli. These children were in utero during the civil wars that happened in 2011, 2014, and 2019. A case-control study was carried out comparing the two groups in terms of family history of psychological disorders. The child’s sex, parents’ age, and birth complications were controlled. Conditional logistic regression models were utilized to examine whether family history of psychological disorders predicted ASD. Findings from this study indicated that: children with ASD were more likely to have relatives with psychological disorders than those without ASD; the proportion of relatives with psychological disorders was significantly higher among children with ASD than those without ASD; there was significant associations between ASD and parents’, grandparents’, uncles’, aunts’ psychological disorders, having a first-degree relative suffers from a psychological disorder was associated with increase in odds of ASD. ,having second-degree relatives with a psychological disorder was significantly associated with increase odds of ASD, psychological disorders in first degree relatives and second degree relatives had comparable effect on the risk of ASD, when first degree relatives and second degree relatives affected the risk of ASD did not increase compared to the presence of a psychological disorder in either relatives

Intergenerational Mobility in India: New Measures and Estimates across Time and Social Groups

We study intergenerational mobility in India. We propose a new measure of upward mobility: the expected education rank of a child born to parents in the bottom half of the education distribution. This measure works well under data constraints common in developing countries and historical contexts. Intergenerational mobility in India has been constant and low since before liberalization. Among sons, we observe rising mobility for Scheduled Castes and declining mobility among Muslims. Daughters’ intergenerational mobility is lower than sons’, with less cross-group variation over time. A natural experiment suggests that affirmative action for Scheduled Castes has substantially improved their mobility. (JEL I24, J13, J15, J16, J62, O12, Z12)

Seasonal and Species‐Level Water‐Use Strategies and Groundwater Dependence in Dryland Riparian Woodlands During Extreme Drought

AbstractDrought‐induced groundwater decline and warming associated with climate change are primary threats to dryland riparian woodlands. We used the extreme 2012–2019 drought in southern California as a natural experiment to assess how differences in water‐use strategies and groundwater dependence may influence the drought susceptibility of dryland riparian tree species with overlapping distributions. We analyzed tree‐ring stable carbon and oxygen isotopes collected from two cottonwood species (Populus trichocarpa and P. fremontii) along the semi‐arid Santa Clara River. We also modeled tree source water δ18O composition to compare with observed source water δ18O within the floodplain to infer patterns of groundwater reliance. Our results suggest that both species functioned as facultative phreatophytes that used shallow soil moisture when available but ultimately relied on groundwater to maintain physiological function during drought. We also observed apparent species differences in water‐use strategies and groundwater dependence related to their regional distributions. P. fremontii was constrained to more arid river segments and ostensibly used a greater proportion of groundwater to satisfy higher evaporative demand. P. fremontii maintained ∆13C at pre‐drought levels up until the peak of the drought, when trees experienced a precipitous decline in ∆13C. This response pattern suggests that trees prioritized maintaining photosynthetic processes over hydraulic safety, until a critical point. In contrast, P. trichocarpa showed a more gradual and sustained reduction in ∆13C, indicating that drought conditions induced stomatal closure and higher water use efficiency. This strategy may confer drought avoidance for P. trichocarpa while increasing its susceptibility to anticipated climate warming.

Oil information uncertainty and aggregate market returns: A natural experiment based on satellite data

Satellites can “see” oil inventory in oil tanks, but they are sensitive to cloud cover. Cloud cover introduces a new uncertainty related to information quality. We measure such information uncertainty by assessing cloud cover over floating roof oil tanks. Using a cloud cover index, we demonstrate that higher information uncertainty leads to lower future returns (mean effect) and a stronger momentum anomaly (interaction effect). These two effects can be explained by investor overconfidence and arbitrage costs, respectively. An investor with a mean–variance preference obtains sizable gains in terms of certainty equivalent return, which accounts for the mean effect.

The impact of basin horizontal ecological compensation policies on carbon emissions: A case study of the Yangtze river economic Belt

The issue of global climate change has garnered increasing attention, with carbon emissions emerging as a significant challenge confronting the world today. As an important means of environmental management, river basin ecological compensation must break through the traditional thinking of "water-centric" and move towards the coordinated development of "pollution reduction". Therefore, the study chooses the watershed scale ecological compensation experiment carried out in the Yangtze River Economic Belt as a natural experiment. Based on the prefecture-level city panel data from 2008 to 2021, a double difference model is constructed to examine the impact of the basin horizontal ecological compensation policy on carbon emissions and its mechanism. The study shows that the inter-regional horizontal ecological compensation measures have an obvious inhibitory effect on carbon emissions in the region, and through a series of tests, the conclusion is stable. Mechanism testing shows that policy implementation achieves carbon emission reductions through two channels: improving financial development and promoting scientific and technological innovation. The results of heterogeneity analysis verify that the effect of policy implementation is affected by the dual factors of social economy and innovation and entrepreneurship and that key cities and cities with a high innovation and entrepreneurship environment produce higher carbon emission reduction benefits. The research conclusions provide policy suggestions for promoting watershed ecological compensation policies to achieve carbon emission reduction from three aspects: encouraging small and medium-sized watersheds to implement city-specific policies, promoting innovative technologies and establishing monitoring and evaluation mechanisms, and strengthening policy support and financial investment.

BCG vaccination reduces bovine tuberculosis transmission, improving prospects for elimination.

Bacillus Calmette-Guérin (BCG) is a routinely used vaccine for protecting children against Mycobacterium tuberculosis that comprises attenuated Mycobacterium bovis. BCG can also be used to protect livestock against M. bovis; however, its effectiveness has not been quantified for this use. We performed a natural transmission experiment to directly estimate the rate of transmission to and from vaccinated and unvaccinated calves over a 1-year exposure period. The results show a higher indirect efficacy of BCG to reduce transmission from vaccinated animals that subsequently become infected [74%; 95% credible interval (CrI): 46 to 98%] compared with direct protection against infection (58%; 95% CrI: 34 to 73%) and an estimated total efficacy of 89% (95% CrI: 74 to 96%). A mechanistic transmission model of bovine tuberculosis (bTB) spread within the Ethiopian dairy sector was developed and showed how the prospects for elimination may be enabled by routine BCG vaccination of cattle.