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Uncertainty and firm investments
Last registered on July 08, 2020

Pre-Trial

Trial Information
General Information
Title
Uncertainty and firm investments
RCT ID
AEARCTR-0006116
Initial registration date
July 03, 2020
Last updated
July 08, 2020 5:14 PM EDT
Location(s)
Region
Primary Investigator
Affiliation
University of Mannheim
Other Primary Investigator(s)
Additional Trial Information
Status
In development
Start date
2020-07-06
End date
2020-08-03
Secondary IDs
Abstract
We study how economic uncertainty affects the investment and hiring plans of firms. We run a large-scale survey among German firms. The survey is in the context of the current Covid-19 crisis and we use the case of Covid-19 induced uncertainty to investigate the relationship between uncertainty and investments. To capture firm’s priors, we first elicit their expectations regarding the economic recovery and how uncertain the (extent and length) of the recovery is to them. Economic uncertainty is then exogenously manipulated through a randomized survey experiment. Respondents in an uncertainty treatment are presented the information that the council of economic experts of the German government has calculated several scenarios (either optimistic or pessimistic) for the economic recovery and that it remains unclear which of the scenarios will realize. The treatment information is presented verbally and graphically where the graphical illustration depicts the economic growth rates for the different scenarios (which are either optimistic or pessimistic). As benchmarks, we have further treatment arms that are either presented no information (control group) or “certainty treatments” which present either the optimistic or pessimistic scenario. After the experiment, we elicit uncertainty again (through a different question than before the experiment). We then have a set of questions which will be used as the outcome variables in our analysis: firms’ plans to invest in the short and medium run as well as their hiring plans in the short and medium run. Overall, our research paper aims to contribute to the literature on the relationship between uncertainty and investments (e.g., Baker, Bloom and Davis, 2016) through exploiting randomized variation in uncertainty in a survey among firms. In addition, we aim to contribute to a deeper understanding of the implications of the current Covid-19 crisis on firm behavior.
External Link(s)
Registration Citation
Citation
Doerrenberg, Philipp. 2020. "Uncertainty and firm investments." AEA RCT Registry. July 08. https://doi.org/10.1257/rct.6116-1.0.
Experimental Details
Interventions
Intervention(s)
We implement a survey with a set of questions in the context of the Covid-19 crisis.
The survey includes a survey experiment with four randomized treatment arms:
i) Control group: no information provided
ii) Certainty I: information about a positive scenario that was presented by the council of economic experts.
iii) Certainty II: information about a negative scenario that was presented by the council of economic experts.
iv) Uncertainty: information about positive and negative scenario which were presented by council of economic experts
All treatment information are presented verbally and in a visual graph.
Intervention Start Date
2020-07-06
Intervention End Date
2020-08-03
Primary Outcomes
Primary Outcomes (end points)
i) investment plans in the short run (next 12 months)
ii) investment plans in the medium run (next 12-24 months)
iii) hiring plans in the short run (next 12 months)
iv) hiring plans in the medium run (next 12-24 months)
Primary Outcomes (explanation)
Our outcome variables are elicited through survey answers that follow the randomized survey experiment
Secondary Outcomes
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
See "interventions" described above.
Economic uncertainty is exogenously manipulated through a randomized survey experiment.
Respondents in an uncertainty treatment are presented the information that the council of economic experts of the German government has calculated several scenarios (either optimistic or pessimistic) for the economic recovery and that it remains unclear which of the scenarios will realize. The treatment information is presented verbally and graphically where the graphical illustration depicts the economic growth rates for the different scenarios (which are either optimistic or pessimistic).
We have further treatment arms that are either presented no information (control group) or “certainty treatments” which present either the optimistic or pessimistic scenario.
Experimental Design Details
Randomization Method
Randomization done by the software that we use for the survey (qualtrics)
Randomization Unit
Firm
Was the treatment clustered?
No
Experiment Characteristics
Sample size: planned number of clusters
Treatment is not clustered. See below for the number of firm-level observations.

Sample size: planned number of observations
We approach approximately 600,000 firms and invite them to participate in our survey. We are uncertain regarding the response rate and thus cannot name a final number of observations. For example, a response rate of 1% would imply that we have 6,000 independent firm-level observations-
Sample size (or number of clusters) by treatment arms
Even distribution of observations across the four treatment arms
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB
INSTITUTIONAL REVIEW BOARDS (IRBs)
IRB Name
IRB Approval Date
IRB Approval Number
Post-Trial
Post Trial Information
Study Withdrawal
Intervention
Is the intervention completed?
No
Is data collection complete?
Data Publication
Data Publication
Is public data available?
No
Program Files
Program Files
Reports, Papers & Other Materials
Relevant Paper(s)
REPORTS & OTHER MATERIALS