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ECON4260 Principles Of Econometrics

tag 0 Download 2 Pages / 369 Words tag 24-06-2021
  • Course Code: ECON4260
  • University: York University
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  • Country: Canada


The aim of this assignment is to replicate some of the main results of Card and Krueger (1994)’s minimum wage study. All your work must be done in Stata (R and Pandawill also be accepted). Your submission must consist of a do-file and a small text document (word, latex, a clean log file) reporting your replication results.

  1. Download from the assignment page on Moodle, the NBER Working Paper, "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania" by David Card and Alan Krueger. This paper was published in The American Economic Review, volume 84-4, September, 1994 and can also be downloaded from the Moodle section of the course Introduction to causal inference. Read the Working Paper as it has all the information you need to replicate results. This paper exploits anatural experiment.
  2. In this paper, which US state constitutes the treatment group and which US state constitutes the control group? What is the treatment?
  3. As for assignment 1, download the data used by Card and Krueger (1994) from my

Add the above command in your replication dofile. There is no available document describing the data for this dataset beyond the very clear variable labels of provided by the datasets.

This paper exploits a longitudinal sample of fast-food restaurants (the units of observation) in Pennsylvania and New-Jersey to identify the causal effect of minimum wage. Longitudinal (Panel) data follow sample units over time. Each collection period is referred to as a wave. In this paper, data were collected at two points in time: i) before the introduction of the minimum wage ii) after the introduction of the minimum wage. We thus have 2 waves of data. The data set provided is organized in wide format. Both waves of data are reportedon the same row for each unit of observation. Variable names ending with “2” refer to the realization of that variable in the second wave (after the introduction of minimum wage).

Ideally, a good control group resembles the treatment group in every dimensions (observables and unobservables) but for the treatment. This could be loosely checked using observational data by examining the means of key variables before being exposed to thetreatment. This is what the authors do in Table 2: “Means of Key Variable”.

Table 2 including the test of equality of mean covariates between NJ and PA. Make sure to carefully read the paper to correctly construct the variables from the sample provided.

After presenting pre-treatment statistics, it is commonplace for an empirical paper exploiting a natural experiment to identify a causal effect, to estimate raw(unadjusted) difference-in-differences estimates. This is essentially what is done in Table 3.

Table 3.

Card and Krueger (1994) then present the impact of the change in minimum wage law on employment, adjusted for observable differences in store characteristics, in

 Table 4.

Table 5 presents various robustness checks to show readers that their results on employment are robust to model specifications. Tables 6 and 7 report the impact of minimum wage on other outcomes. I will not ask you to replicate those. If you managed to replicate Table 4 correctly. Consider this a great achievement. I wish you Happy Holidays and the very best for 2019!


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