Suppose gender and which place a person is born are both fully random and cannot be...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Suppose gender and which place a person is born are both fully random and cannot be manipulated. For simplicity, suppose there are only two genders and we only consider people who are born in the north and people who are born in the south. Let FE {0, 1} indicate gender where F = 1 if and only if i is female. Similar, let's use NE {0, 1} to denote birthplace where N₁ = 1 if and only if i was born in the north. Let Y be income. i) Let D₁ = 1 if (F, N) = (1, 1), D₂ = 1 if (F, N) = (1,0), D3 = 1 if (F, N) = (0, 1) and D₁ = 1 if (F, N) = (0,0). In Lecture 5, we know that it is without loss of generality to write Y = 71D1 +72D2 + Y3D3 + 74D4+u with E(u D1, D2, D3, D4) = 0. Now verify that D₁ = F x N, D₂ = F x (1-N), D3 = (1-F) x N and D₁ (1-F) x (1- N). ii) Given i), rewrite the regression in i) by replacing D₁ to D4 with expressions of F and N. iii) What is the expected income for females born in the north? Female born in the south? Male in the north? Male in the south? iv) What is the difference in expected income between female and male who are both born in the north? How about the female-male difference for those who are both born in the south? v)What's the difference of the two difference in iv)? (This is called difference-in-difference.) vi) Can we consistently estimate the difference in v) by OLS? Suppose gender and which place a person is born are both fully random and cannot be manipulated. For simplicity, suppose there are only two genders and we only consider people who are born in the north and people who are born in the south. Let FE {0, 1} indicate gender where F = 1 if and only if i is female. Similar, let's use NE {0, 1} to denote birthplace where N₁ = 1 if and only if i was born in the north. Let Y be income. i) Let D₁ = 1 if (F, N) = (1, 1), D₂ = 1 if (F, N) = (1,0), D3 = 1 if (F, N) = (0, 1) and D₁ = 1 if (F, N) = (0,0). In Lecture 5, we know that it is without loss of generality to write Y = 71D1 +72D2 + Y3D3 + 74D4+u with E(u D1, D2, D3, D4) = 0. Now verify that D₁ = F x N, D₂ = F x (1-N), D3 = (1-F) x N and D₁ (1-F) x (1- N). ii) Given i), rewrite the regression in i) by replacing D₁ to D4 with expressions of F and N. iii) What is the expected income for females born in the north? Female born in the south? Male in the north? Male in the south? iv) What is the difference in expected income between female and male who are both born in the north? How about the female-male difference for those who are both born in the south? v)What's the difference of the two difference in iv)? (This is called difference-in-difference.) vi) Can we consistently estimate the difference in v) by OLS?
Expert Answer:
Answer rating: 100% (QA)
i Yes this is correct We can write Y Y1D1 Y2D2Y3D3 Y4D4u with Eu D1 D2 D3 D40 whe... View the full answer
Related Book For
Money Banking and Financial Markets
ISBN: 978-0078021749
4th edition
Authors: Stephen Cecchetti, Kermit Schoenholtz
Posted Date:
Students also viewed these economics questions
-
You are about to hire a new employee Your firm currently has a 10 chance of bankruptcy because you are uninsured and face possible lawsuits that may be greater than your ability to pay The potential...
-
You are about to borrow $10,000 from a bank at an interest rate of 10% compounded annually. You are required to make five equal annual repayments in the amount of $2,638 per year, with the first...
-
For many years you have been using your local, small-town bank. One day you hear that the bank is about to be purchased by Bank of America. From your vantage point as a retail bank customer, what are...
-
Find the area under one arch of the cycloid x = a(t - sin t), y = a(1 - cos t).
-
On a graph mark the market equilibrium and show the efficient quantity of water taken. A natural spring runs under land owned by ten people. Each person has the right to sink a well and can take...
-
Comparative financial statement data for Cool Brewery Company and Northern Beer Company, two competitors, follow (amounts in thousands): Required: a. Prepare a common size analysis for 2008 for Cool...
-
What is the Developmental Configuration?
-
Vice President for Sales and Marketing Sam Totter is trying to plan for the coming year in terms of production needs to meet the sales demand. He is also trying to determine ways in which the...
-
Dillon, Neo, and Seely's "Civil Keystrokes" ( Ohio Communications Journal, 56 , March 2018) is an excellent example of a research article summarizing a primary research study; it follows the...
-
The MFG Corporation is planning to produce and market three different products. Let x1, x2, and x3 denote the number of units of the three respective products to be produced. The preliminary...
-
Consider the isothermal mixing of two ideal gases of unknown moles and unknown volumes. Which of the statements below are INCONSISTENT with this process? Consider the isothermal mixing of two ideal...
-
How would salespeople respond most effectively to increased post-sale expectations?
-
In the Ricardian trade model, a country captures more of the gains from trade if: A. it produces all products while its trade partner specializes in one good. B. the terms of trade are closer to its...
-
Why is the cost allocation process important to health services managers?
-
It might be counter-intuitive, but knowing when to walk away is sometimes the best course of action. When is it a salespersons best course of action?
-
Describe the three forms of expansion selling.
-
Amy saved $3210. Mia saved twice as much as Amy. Amy saved 3 times as much as Ned. (a) How much did Ned save? (b) How much money must Mia give to Ned so that they each have the same amount of money?
-
Give an example of transitory income. What effect does this income have on the marginal propensity to consume?
-
In September 1992, a speculative attack compelled the United Kingdom to devalue the British pound versus the German currency (Deutsche Mark). How did monetary policy in both countries influence this...
-
Plot the percentage change from a year earlier of the value of the S&P 500 stock index (FRED code: SP500). Visually, has the risk of the S&P 500 index changed over time?
-
While we often associate informal financial arrangements with poorer countries where financial systems are less developed, informal arrangements often co-exist within the most developed financial...
-
Using Rayeigh's method, determine the fundamental natural frequency of the system shown in Fig. 8.42. Disc, mass moment of inertia 5 kg-m Steel shaft, dia. 5 cm + O 0.8 m -0.2 m- FIGURE 8.42...
-
Solve Problem 8.73 using the Rayleigh-Ritz method with the mode shape \[U(x)=c_{1} \sin \frac{\pi x}{2 l}+c_{2} \sin \frac{3 \pi x}{2 l}\]
-
Find the first two natural frequencies of a fixed-fixed uniform string of mass density \(ho\) per unit length stretched between \(x=0\) and \(x=l\) with an initial tension \(P\). Assume the...
Study smarter with the SolutionInn App