A mother notices that all of her young children have come back from the park soaking wet. She looks outside and notices that it
is raining lightly. She concludes that her children must have gotten wet because of the rain. Which of the following, if true, would suggest that the rain and her children's wet clothes are causally related rather than simply correlated?
Life in rural areas of developing countries is prone to many kinds of risk, such as illness or
mortality of household members, crop or other income loss due to natural phenomena (weather,
insect infestations, or fire, for example), and civil conflict. In addition to their contemporaneous
effects, the effects of certain types of shocks may still be felt many years or even decades later.
From a public policy standpoint, it is particularly important to identify shocks that have large
long-run effects. Moreover, the mechanics underlying the persistence of shocks may be of considerable
interest. For example, a health shock may have a long-run effect simply because the
health shock itself persists over time. Alternately, the health shock may not directly affect longrun
outcomes, but it could affect some other outcome—such as educational attainment—that
helps determine long-run well-being.
