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Problem Set 2

The document outlines Problem Set 3 for Econometrics 742, detailing three problems that involve fixed effects regression and difference-in-differences estimators using various datasets. Each problem requires the application of different statistical methods in Stata, including standard errors and clustering techniques. The problems aim to compare results across different methodologies and data manipulations to understand the implications of the chosen approaches.

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7 views2 pages

Problem Set 2

The document outlines Problem Set 3 for Econometrics 742, detailing three problems that involve fixed effects regression and difference-in-differences estimators using various datasets. Each problem requires the application of different statistical methods in Stata, including standard errors and clustering techniques. The problems aim to compare results across different methodologies and data manipulations to understand the implications of the chosen approaches.

Uploaded by

uditm
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Problem Set 3

Econometrics 742
Chris Taber
Due: Wed. Feb. 22

Problem 1. Take any data set you would like (or you can use the wagepan.dta data from
http://www.stata.com/texts/eacsap/)
You can pick any fixed effect regression you would like, but I would like you to run it
a number of different ways

a) Use xtreg, fe command in stata (using straight standard errors, and clustering by
person)
b) Do the fixed effects regression, i.e. regress (Yit − Ȳi ) on (Xit − X̄i ). You can construct
the Ȳi variable by using the egen command with by. Get the standard errors two
ways-the standard way and clustering by person.
c) Also first difference the data and get standard errors with and without the cluster
command

How do all of these results compare? What happends if you only use two periods?

Problem 2 Now take the data set jtrain1 (also from from http://www.stata.com/texts/eacsap/)
This has data on firms and the amount of job training they get.

a) Only use the data from 1987 and 1988. Construct the difference in differences
estimator in two different ways:
i) Construct the 4 means (control,treatment×before,after)
ii) Run the regression

hrsempit = β0 + β1 grantit + β2 1(year = 1988) + β3 Ei + uit

where Ei is a dummy variable for being a treatment (i.e. someone who would
receive the grant in 1988).
iii) Run the fixed effect regression:

hrsempit = θi + β1 grantit + β2 1(year = 1988) + uit

Do you get exactly the same answer, why or why not?


B) Now include a firm specific time trend in the model in two different ways:
i) use the xi command (something like xi: reg y x i.fcode*year)
ii) For each firm, run a regression of x and y on an intercept and a time trend,
take the residuals and run them on eachother (not sure the cleanest way to
do this, but you could again use egen with by)
Problem 3. Now use the data set reg.raw.txt that you can get from the computer software
part of my website.
You can read it into stata using the comand: infile coll merit male black asian year
state chst using regm.raw
Now the difference in difference model 4 different ways

a) Standard regression using all data (construct standard errors 3 ways, robust, cluster
by state year, cluster by state)
b) Standard regression using all data but weighted so that all states get the same
weight
c) Now take the mean of all variable by state × year and run the diff in diff regression
(robust se, and clustering by states)
d) Do the same as in c, but weight by state so it looks like the population

How does this all compare?

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