You need to use two data sets for this exercise, JTRAIN2 and JTRAIN3. The former is the outcome of a job training experiment. The file JTRAIN3 contains observational data, where individuals themselves largely determine whether they participate in job training. The data sets cover the same time period.

(i) In the data set JTRAIN2, what fraction of the men received job training? What is the fraction in JTRAIN3? Why do you think there is such a big difference?

(ii) Using JTRAIN2, run a simple regression of re78 on train. What is the estimated effect of participating in job training on real earnings?

(iii) Now add as controls to the regression in part (ii) the variables re74, re75, educ, age, black, and hisp. Does the estimated effect of job training on re78 change much? How come? (Hint:

Remember that these are experimental data.)

(iv) Do the regressions in parts (ii) and (iii) using the data in JTRAIN3, reporting only the estimated coefficients on train, along with their t statistics. What is the effect now of controlling for the extra factors, and why?

(v) Define avgre 5 1re74 1 re752/2. Find the sample averages, standard deviations, and minimum and maximum values in the two data sets. Are these data sets representative of the same populations in 1978?

(vi) Almost 96% of men in the data set JTRAIN2 have avgre less than $10,000. Using only these men, run the regression