How do Fuchs-Schuendeln and Hassan (FSH enceforth) define natural experiments

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  1. How do Fuchs-Schuendeln and Hassan (FSH enceforth) define natural experiments?
  2. According to FSH, what is the main task of a researcher who is analyzing a natural
    experiment?
  3. For the purpose of their discussion, how do FSH define the fundamental causes of
    economic growth?
  4. For the purpose of their discussion, how do FSH define institutions?
  5. A type of institution that is believed to be an important determinant of economic
    growth and of the current level of per capita income of a country is the degree of
    protection of property rights. Explain why (according to FSH) it makes sense to think
    that the degree of protection of property rights influences per capita income. Also,
    explain why causation could potentially run the other way.
  6. Consider the regression model
    log(Yi) = α + βRi + Xiγ + ϵi (1)
    where Yi
    is income per capita in country i, Ri
    is a measure of the protection of property
    rights and Xi
    is a vector of controls. Let βˆ define the Ordinary Least Squares (OLS)
    estimator of β.
    (a) What restriction needs to hold for βˆ to be an unbiased estimator of β?
    Hint: covariance.
    (b) Do Acemoglu, Johnson and Robinson find that Ri
    is positively or negatively
    related to Yi?
  7. This question makes reference to the econometric model appearing in question 6. To
    be a good instrument for the degree of protection of property rights (Ri) a variable
    needs to be correlated (positively or negatively) with Ri
    . Explain why the disease
    environment at the time of European colonization (as measured by the mortality rates
    of soldiers, bishops and sailors stationed in country i between 1600 and 1800 CE) may
    be correlated with the degree of protection of property rights in country i in present
    days.
  8. Regarding the work of Hornbeck and Naidu (2014) reported by FSH:
    2
    (a) What do they find regarding the effects of the Great Mississipi Flood of 1927 on
    the capital intensity of the agricultural sector of flooded and non-flooded areas?
    (b) What assumption must hold for their natural experiment to identify the effect of
    flooding on capital intensity?
  9. FSH report the work of Acemoglu, Hassan and Tahoun (ACT) who use individual
    firm stock returns and intensity of protests in Tahrir Square during Egypt’s Arab
    Spring “to measure the real-time effects of popular mobilization in street protests on
    investors expectations of economic rents from future favoritism and corruption accruing
    to politically connected firms.”
    (a) What are the two main identifying assumptions used by ACT?
    (b) Do ACT find that the stock returns of all firms are affected in the same manner
    by the intensity of street protests? Do their results provide evidence that street
    protests may limit corruption? Briefly justify your answers.

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