Suppose we want to understand the impact of a federal law mandating health insurance coverage passed...

 

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Suppose we want to understand the impact of a federal law mandating health insurance coverage passed in year 2 for employees on companies' profit level. For simplicity, let's assume that there are only two companies, A and B. Company A did not offer health insurance before the federal law, so they have to update their policy. Company B already offered health insurance before the federal law, so they are not affected. Year Profits of Company A Profits of Company B year 1 10 millions 15 millions year 2 14 millions 21 millions a What is the outcome Y? And what is the treatment? b Can we attribute the change in profibility of company A before and after the policy change all to the federal insurance law? And why? c Can we attribute the difference in profibility of company A compared to company B after the policy change all to the federal insurance law? And why? d Calculate the DiD estimate and interpret it in this problem's context. e Explain what is the parallel trend assumption, and why it is important. Suppose we want to understand the impact of a federal law mandating health insurance coverage passed in year 2 for employees on companies' profit level. For simplicity, let's assume that there are only two companies, A and B. Company A did not offer health insurance before the federal law, so they have to update their policy. Company B already offered health insurance before the federal law, so they are not affected. Year Profits of Company A Profits of Company B year 1 10 millions 15 millions year 2 14 millions 21 millions a What is the outcome Y? And what is the treatment? b Can we attribute the change in profibility of company A before and after the policy change all to the federal insurance law? And why? c Can we attribute the difference in profibility of company A compared to company B after the policy change all to the federal insurance law? And why? d Calculate the DiD estimate and interpret it in this problem's context. e Explain what is the parallel trend assumption, and why it is important.

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Answer 1 General guidance The answer provided below has been developed in a clear step by step manner 2 Step By Step Step 1 a The outcome Y is the profits of the two companies and the treatment is the ... View the full answer