Question

7. Consider a situation where researchers use an unusually large change in a province A’s minimum wage to study how it affects employment in that province and compare the change in employment in province A to the change in employment in province B where the minimum wage is kept constant?

(a) What kind of experiment are they using?

(b) What kind of estimator are they using?

(c) Why would we expect this estimator to have less bias than the naïve estimator using a before and after (pre-post) comparison using only province A?

answer those in few sentences please thank you

Answer 1

a) In this experiment there are two groups, i.e. Province A and Province B. The treatment is applied to only one of the groups which is Province A and then after the application of the treatment the observations are taken. Hence Province A is the experimental group and Province B is the control group. These groups have not been pretested. Hence this experiment is Post-test Only experimental design.

b) Naive estimator because there are jumps at the lowest wage levels while having relatively much less change at higher wage levels.

c) By applying the treatment to Province A only and then noting the observations in Province A and Province B simultaneously we are doing away with any differences in the employment changes pattern due to seasonality/time. If we had used pre-post comparison using only Province A then the impact of seasonality/time on employment changes could have created bias in the data.