On April 1, 1992, New Jersey’s minimum wage was increased from $4.25 to $5.05 per hour,...

On April 1, 1992, New Jersey’s minimum wage was increased from $4.25 to $5.05 per hour, while the minimum wage in Pennsylvania stayed at $4.25 per hour. Energetic students collected data on 410 fast food restaurants in New Jersey (the treatment group) and eastern Pennsylvania (the control group). The “before” period is February 1992, and the “after” period is November 1992. Using these data, we will estimate the effect of the “treatment,” raising the New Jersey minimum wage on employment at fast food restaurants in New Jersey (i.e., H_0:δ=0 versus H_A:δ<0). It is easier and more general to use the regression format to compute the differences-in-differences estimate using sample means. Let y=FTE employment , the treatment variable is the indicator variable NJ=1 if observation is from New Jersey, and zero if from Pennsylvania. The time indicator is D=1 if the observation is from November and zero if it is from February.

(a.)Write out the regression equation.

(b)Report the least squares estimates .

(c)At the α=.05 level of significance the regression region for the left tail test in above hypotheses is t≤-1.645, what is your conclusion?

(d)As with randomized control (quasi) experiments it is interesting to see the robustness of the result from (c). Please, add indicator variables for fast food chain and whether the restaurant was company-owned rather than franchise-owned. These changes alter the DID estimator?

(e)Please, add indicator variables for geographical regions within the survey area. These changes alter the DID estimator?

Solutions

Expert Solution

milcah answered 2 months ago

Next > < Previous

Related Solutions

On April 1 1992, NJ increased its minimum wage to $5.05, at the time the highest...

On April 1 1992, NJ increased its minimum wage to $5.05, at the time the highest minimum wage in the country. David Card and Alan Krueger saw an opportunity to understand how the minimum wage affects employment. They surveyed fast food restaurants in February 1992 (before increase) and November 1992 (after increase) in both NJ and in PA (which did not change its minimum wage in this time period). The survey asked how many employees they had. They then ran...

If the legal minimum wage were increased, from its current rateof $7.25 an hour, gradually...

If the legal minimum wage were increased, from its current rate of $7.25 an hour, gradually in steps up over the next 4 years, to $11 an hour (about a 50% increase), describe THREE different possible effects on labor markets (via workers and employers)--at least one positive and one negative:

Using the diagram above, suppose the minimum wage was increased to $15 an hour. The results...

Using the diagram above, suppose the minimum wage was increased to $15 an hour. The results would be: Group of answer choices 18.3 million people would be employed 1.3 million workers would lose their jobs a shortage of 3 million workers A surplus of 1.7 million workers

Ontario passed legislation to increase Ontario’s general minimum wage from $11.60 per hour to $14 per...

Ontario passed legislation to increase Ontario’s general minimum wage from $11.60 per hour to $14 per hour on January 1, 2018 and then to $15 per hour on January 1, 2019. Increases in the minimum have always been contentious with business arguing against them. In October 2006, the Economic Policy Institute (EPI) in the USA released a formal statement titled "Hundreds of Economists Say: Raise the Minimum Wage" signed by 659 economists including four Nobel Prize winners in Economics and...

4. Suppose voters choose to increase their state's minimum wage to $6 per hour from $5...

4. Suppose voters choose to increase their state's minimum wage to $6 per hour from $5 per hour. Suppose further that the equilibrium wage in this market would have been $4 per hour. a. Draw the demand and supply curves in this market, and illustrate what would happen to the quantity demanded and supplied of labor under each minimum wage (will there be a shortage or surplus? Under which minimum wage will the shortage or surplus be larger? b. Let’s...

A minimum wage law that stipulates $25 per hour for domestic workers in the state of...

A minimum wage law that stipulates $25 per hour for domestic workers in the state of Virginia is: (a)A binding price ceiling (b)A non-binding price floor (c)Going to increase the rent of domestic workers (d)Going to increase consumers’ surplus (36)Suppose a government sets a pricing policy of $8 per ticket in a market for train tickets where the demand for these tickets is represented by the demand equation D=120-4P and the supply equation of these tickets is represented by S=90...

"If the federal minimum wage is raised gradually to$15-per-hour by 2020, the employment rate for...

"If the federal minimum wage is raised gradually to $15-per-hour by 2020, the employment rate for low-wage U.S. workers will be substantially lower than it would under the status quo."Create a 3-4 page paper in which you indicate your agreement or disagreement with the statement above. You must support your position with reference to economics principles, the use of examples and a minimum of 4 research sources.

The federal minimum wage in the United States is currently $7.50 per hour. Joe Biden, the...

The federal minimum wage in the United States is currently $7.50 per hour. Joe Biden, the Democratic candidate for President, proposes to increase it to $15. Based on your knowledge of the elasticity of labour demand for low-wage workers, how would you expect Biden’s plan to affect: a. Employment of low-wage workers. Be precise. b. Earnings of low wage workers. Be precise. c. Prices of goods produced with low-wage labour. Explain and illustrate. d. Summarize the effects of this tax...

Faced with rising pressure for a $14 per hour minimum wage rate, the farming industry is...

Faced with rising pressure for a $14 per hour minimum wage rate, the farming industry is currently exploring the possible use of robotics to replace some farm workers. The Produce Bot is one such robot; its job is to thin out a field of lettuce, removing the least promising buds of lettuce. By removing these weaker plants, the stronger lettuce plants have more room to grow. Assume the following facts: 1.One Produce Bot would do the work of 25 farm...

It is 2020. The US government has passed a new federal minimum wage of $11.00/ hour....

It is 2020. The US government has passed a new federal minimum wage of $11.00/ hour. It will go into effect on January 1, 2021. Please follow the instructions, given the background information in items A, B, C, and D below. Instructions 1. Calculate the immediate financial impact in 2021 (change in hourly wages) on the profitability of the company due to the impending increase in the minimum wage. Ignore tax issues such as employment tax in your calculation. 2....

Subjects