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What is the difference in schooling levels between

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1. What is the difference in average schooling levels between individuals in the OldHigh and YoungHigh groups? Is that a reasonable estimate of the effect of the school construction program? Why/ why not?

2. What is the difference in schooling levels between individuals in the YoungLow and OldLow groups? Use the four groups to construct a difference-in-difference estimate of the effect of the school construction program on years of schooling

3. Construct a difference-in-difference estimate of the effect of the school construction program on log wages. Show your calculation using the average quantities for the four groups.

4. Write down a regression equation that we would estimate using OLS in order to obtain the same DiD estimate found in part (b) and the standard errors. Make sure to define all the variables in your equation.

5. Under what assumptions is the DiD a consistent estimator of the school construction program effect? (Describe this assumption in the context of this question.)

6. Suppose that during the years 1974-78 the Indonesian government also launched a massive health care initiative targeted at primary age children and targeted at the same regions as the school construction program. How would your interpretation of the estimates you computed above change as a result of this additional information?

7. Although the parallel trend assumption can not be tested, we can examine the implication of this assumption for earlier cohorts. To do this, we use a "control" experiment (or placebo or falsification test) which repeats DiD analysis but now compares the "old" to the "very old" cohorts. Neither of these two groups benefited from the school construction program. What do we expect the DiD estimate in this control experiment to be if the parallel assumption is satisfied?

8. The result of this control experiment is reported in Panel B of Table 3. Write down the reported DiD estimates from this control experiment for education and wages. What can you conclude from these results?

Reference no: EM133599339

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