Problem 4 (60 points) Difference-in-Difference In the beginning of 2001, North Dakota legalized fireworks. Suppose you are interested in studying the effect of the legalizing of fireworks on the number of house fires in North Dakota. Unlike North Dakota, South Dakota did not legalize fireworks and continued to ban them. You decide to use a Difference-in-difference (DID) Model. The numbers of house fires in each state at the end of 2000 and 2001 are as follows: Year Number of house fires in North Dakota 35 50 Number of house fires in South Dakota 54 64 2000 2001 C. a. What is the outcome? (5 points) b. What is the change in the outcome for the treatment group between 2000 and 2001? Show your working for full credit. (10 points) Can we interpret the change in the outcome for the treatment group between 2000 and 2001 as the causal effect of legalizing fireworks on number of house fires? Explain your answer. (10 points) d. What is the change in the outcome for the control group between 2000 and 2001? Show your working for full credit. (10 points) What is the difference in difference estimate and how do you interpret it? Show your working for full credit. (20 points) f. In the context of this problem, state the assumption required to interpret the Difference-in-Difference estimate as the causal effect of the policy. (5 points) e