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The power of natural experiments

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  • Steven D. Levitt

    (University of Chicago)

Abstract

The natural experiment approach is one that is uniquely suited to the types of problems businesses face, and yet it is almost never used in the business world. Any company that embraces natural experiments, in my opinion, will gain a huge competitive advantage. They are easy analyses to carry out, and the findings are easy to explain. To do them well relies on a deep understanding of the institutional details and often access to proprietary data, something businesses naturally have that academics don’t have. Because they only involve analyzing events that occurred in the past, they are free to carry out, generate immediate parameter estimates, and pose no risks.

Suggested Citation

  • Steven D. Levitt, 2025. "The power of natural experiments," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 60(1), pages 6-9, January.
    • Handle: RePEc:pal:buseco:v:60:y:2025:i:1:d:10.1057_s11369-025-00389-3
    DOI: 10.1057/s11369-025-00389-3
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