Answer to Question #99183 in Macroeconomics for annie

Question

How does Card-Krueger Study satisfy the natural experiment conditions?

Answer 1

A natural experiment is an observational study in which the control and experimental variables of interest to us are not artificially manipulated by researchers, but instead, the influence of factors beyond the control of the researchers is allowed. Unlike traditional experiments, natural experiments are not controlled by researchers, but are observed and analyzed.

On April 1, 1992, New Jersey's minimum wage increased from $ 4.25 to $ 5.05 per hour. To assess the impact of this increase, David Card and Alan B. Krueger examined 410 fast food restaurants in New Jersey and Pennsylvania before and after raising the low. A comparison of changes in wages, employment, and store prices in New Jersey compared to stores in Pennsylvania (where the minimum wage remained fixed at $ 4.25 per hour) provides simple estimates of the effects of higher minimum wages.

Thus, the researchers did not control the situation connected with the increase in wages, but observed, compared and analyzed the situation. So the teachings of David Card and Alan B. Krueger satisfy the natural experiment conditions.

https://www.nber.org/papers/w4509

https://www.thoughtco.com/natural-experiments-in-economics-1146134