Introduction to Econometrics Assignment

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Reference no: EM132401313

Introduction to Econometrics Assignment -

For this assignment, we will replicate the DD study by Gruber & Poterba (1994) [a la Donald & Lang, 2007]. In their study, they estimate the impact of TRA86 on health insurance take-up of 'self-employed' workers. The policy intervention they use is a tax subsidy on health insurance purchase for the self-employed introduced in the Tax Reform Act of 1986. There treatment group are the self-employed workers and their control group are the other workers who are employed. In particular, they look at the aggregate insurance rates of these two groups.

Question 1 - We will use the data in Table IV of their paper (which is recreated below in Table 1) to replicate their DD results from Table VI of their paper. In particular they ?nd a DD estimate of 6.7 with a standard error of 0.8. Calculate this using the table below. [Hint: refer to Table VI of their study; they compare years 1985-86 to 1988-89]

Table 1: Aggregate Insurance Rates
Year	Self-Employed	Employed
1982	68.9	88.6
1983	72.0	88.9
1984	68.9	88.1
1985	68.6	88.0
1986	70.1	88.0
1987	76.1	86.8
1988	73.2	86.1
1989	73.5	84.5
Source: Table IV of GP1994

Question 2 - Would the result be different if we had data for the years 1986 and 1988 only. How different is this from Question 1.

Question 3 - First, find the difference in employment between self-employed and employed for all years. Now, find the DD estimate relative to the previous year [i.e. the difference, relative to last year, of the difference you just calculated]. Think of this as if there was a policy every year starting with 1983. We are finding a placebo-DD for all years. How do these compare with the real effect (i.e. for the year 1986-87)? Using the standard errors from Question 1, test the significance for the estimates for each year at 5%? What is an issue with our findings?

Question 4 - The DD estimates we've found so doesn't utilize all the years of information we have. Write out a DD regression equation which would include all the years. Run this regression and explain the difference from Question 1. [Hint: create a dummy variable for pre- and post-TRA86].

Question 5 - Draw a chart of the DD estimates you found in Questions 1 and 4 with a confidence interval around each of the estimates.

Do the same on another chart for Question 3. [Here you have estimates for each of the years starting in 1983.]

Reference no: EM132401313

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