For this exercise, we use JTRAIN to determine the effect of the job training grant on hours of job training per employee. The basic model for the three years is hrsempit 5 b0 1 d1d88t 1 d2d89t 1 b1grantit 1 b2granti,t2l 1 b3log1employit 2 1 ai 1 uit.

(i) Estimate the equation using fixed effects. How many firms are used in the FE estimation? How many total observations would be used if each firm had data on all variables (in particular, hrsemp) for all three years?

(ii) Interpret the coefficient on grant and comment on its significance.

(iii) Is it surprising that grant21 is insignificant? Explain.

(iv) Do larger firms provide their employees with more or less training, on average? How big are the differences? (For example, if a firm has 10% more employees, what is the change in average hours of training?)