SOL_API-202A+Assignment+3+S09

SOL_API-202A+Assignment+3+S09 - API-202A Empirical Methods...

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1 API-202A Empirical Methods II Spring 2009 Assignment 3 Section I due February 24 at 10:10am in Classroom (no manila envelope needed) Section II due February 26 at 10:10am in Classroom (no manila envelope needed) Sections III and IV due February 26 at 5pm (Drop in API202A mailbox inside manila envelope with your KSG mailbox # written outside) Section I. Computers, Technology, and Return to Education (Part 1, Krueger 1993) A House representative from New Jersey wants to add to the stimulus plan a program that subsidizes the use of computers in the workplace for white-collar workers with low salaries. He states that “The use of computers is a key tool to increase workers salaries as it increases their productivity. We should subsidize the use of computers at work for white-collar workers with low salaries. This policy will increase the productivity of the economy, helping to jump start it, and it will increase the payoff that these workers receive from their years in college/high school [ i.e. increase the return to education ]. In fact, research has shown that workers who use computers on their job earn higher wages.” The congressman was referring to the following research paper: Krueger, Alan B, 1993. "How Computers Have Changed the Wage Structure: Evidence from Microdata, 1984- 1989," The Quarterly Journal of Economics , MIT Press, vol. 108(1), pages 33-60, February. A Senator from Iowa wants, instead, to add to the stimulus plan a program that subsidizes Ethanol production. His strategy is to argue against the evidence cited by the representative from New Jersey. Assume that you work for one of these two congressmen and that you are asked to explain the details of the paper in a brief. Both congressmen refer to the paper in public, but in private both recognize that they don’t understand much of it (keep the secret please). The congressman you work for sends you a list of questions and he asks you to prepare written answers. He tells you to use a language that he can understand - assume that he is intelligent, that he basically knows what running a regression is but that he doesn’t know how to interpret it.
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2 Interpretation of the coefficients in the paper. As I mentioned in class today, this paper runs a type of regression that is slightly different than the one we have seen so far. The material we have studied in class applies to this type of regression as well, except that the interpretation of the coefficients is slightly different. I am writing down for you the explanation I gave about it in class using a simple example. Note also that many of the questions do not depend specifically on this issue. Y : wages X 1 : years of schooling (YOS) The standard case: Y = 0 ˆ 1 ˆ X 1 + ˆ The case in the paper: Log(Y) = 0 ˆ 1 ˆ X 1 + ˆ Interpretation of 1 ˆ (in words) An additional YOS is associated with an average increase on wages of 1 ˆ dollars in the sample An additional YOS is associated with an average
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SOL_API-202A+Assignment+3+S09 - API-202A Empirical Methods...

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