Causal Inference (in brief What does randomization do? Consider a linear model =BT+∑7 Bi is the treatment effect on firm i Consider treated firms=1)and control firms i=O), and subtract averages 7=32+∑(2- b is the average treatment effect Randomization guarantees the second term holds in expectationCausal Inference (in brief!) • What does randomization do? • Consider a linear model – is the treatment effect on firm i • Consider treated firms ( ) and control firms ( ), and subtract averages • is the average treatment effect • Randomization guarantees the second term holds in expectation 5