RES-ECON 162 Lecture 12: Res econ 262 4:4

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Resource Economics
Course Code
Laurence De Geeste

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Res econ 262- 4/4/17 Low levels of crime are followed by high levels of crime. How does one identify causality? – Lead exposure and brain damage- in the early 90s, we predicted lead exposure caused brain damage but then later found out that exposure is associated with general plasticity issues and pre-frontal cortex deterioration. Where was the lead coming from? The culprit was a gas additive – tetraethyl lead invented in 1920s. Lead was coming from emissions. Lead settled in soil also doesn’t decay quickly. Childhood lead exposure can seriously reduce IQ. Correlation vs. causation: correlation is not causation. Just because two curves are moving with each other does not mean they are correlated. Natural experiments: First best method: lab experiment. Randomly sample from population of children, then randomly assign to control and treatment, then observe behavior over time and compare. Second best method: exploit “exogenous variation in nature” – random experiment and you cant change anything about it. Some states have more lead exposure than others (variation) Clean air act- 1970s – remove lead from the atmosphere. The reductions were state specific. Each state got a different level of emissions reductions (exogenous variation.) It seems that the EPA is investing money differently into each state. This is exogenous! Identification- when you slice and dice everything you don’t want and look at only everything 333you want to look at. Reyes (2007) - predict crime from lead exposure. Pr(crime) = b(childhood blood lead) +a(other factors) + e ^lead level ^control ^efficiency
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