What is the purpose of card and krueger research

Reference no: EM132194182

Problem - Differences in Differences

1. (Adapted from a Pischke homework problem.) Please read Minimum wages and employment: A case study of the fast-food industry in New Jersey and Pennsylvania, by Card and Krueger.

On April 1^st, 1992 New Jersey raised its minimum wage from $4.25 to $5.05. The minimum in Pennsylvania remained at the federal level of $4.25. We will follow the methodology of Card and Krueger, using differences-in-differences in order to analyze the impact of the minimum wage increase in New Jersey on employment in the fast food industry.

This question uses the fastfood.dta dataset, which contains information on fast food restaurants in New Jersey (NJ) and eastern Pennsylvania (PA) during two interview waves in March and November/December of 1992. The paper and data can be found on Canvas (Sections 3b through 3e in the paper are interesting, but not needed to get through this home- work. They detail a few robustness checks that make the base results more convincing.)

(a) What is the purpose of Card and Krueger's research? What implications do the results of this work have for the minimum wage debate today?

(b) In the diff-in-diff approach, we make a "parallel trends" assumption. Describe what this means in the context of the paper. Give an example of how it could be violated. How do the authors convince us that the it holds? (Use some of their discussion from the paper.)

Reference no: EM132194182

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