Lec19 (1).pdf

# Lec19 (1).pdf - ECO341K Introduction to Econometrics...

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ECO341K Introduction to Econometrics Chapter 13/14: Pooled Time-Series Cross-Section and Panel Data Stephen Donald Stephen Donald () Chapter 13: Panel/TS-CS 1 / 23

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Lecture 19 - Outline Time and cross section dimension Pooled Cross Sections : independent cross sections at di/erent points in time House Price Data °di/ in di/ e/ect of policy Panel Data: observe the same cross section across time Crime data °observed the same 46 in two years 82 and 87 Stephen Donald () Chapter 13: Panel/TS-CS 2 / 23
Pooled Cross Sections Policy Analysis Example: E/ect of a Garbage Incinerator Location on Housing Prices Rumors on new incinerator location between 1978 and 1981 (after 1978). Have cross sections of house prices for houses sold in 1978 and 1981 Have dummy for location of house near incinerator - nearinc Stephen Donald () Chapter 13: Panel/TS-CS 3 / 23

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Pooled Cross Sections Policy Analysis Example: E/ect of a Garbage Incinerator Location on Housing Prices From 1981 data: rprice = 101307 ° 30688 nearinc Houses near the incinerator site sold in 1981 for \$30,688 less on average compared to houses not near the site. Is this right? Stephen Donald () Chapter 13: Panel/TS-CS 4 / 23
Pooled Cross Sections Policy Analysis But Regression in 1978 reveals: rprice = 82517 . 23 ° 18824 . 37 nearinc So houses sold in 1978 that were near the site sold for \$18,824.37 less on average compared to houses not near the site. The policy could not have caused this! Stephen Donald () Chapter 13: Panel/TS-CS 5 / 23

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Pooled Cross Sections Policy Analysis Notice price di/erence is larger in 1981 vs 1978 \$30,688 vs \$18,824. Maybe a better estimate of policy e/ect is Δ in price di/erence is the e/ect of the policy. \$ 30 , 688 ° \$ 18 , 824 = \$ 11 , 864 Note that this estimate is the same as, ˆ δ = ( rprice 1981 , near ° rprice 1981 , not ) ° ( rprice 1978 , near ° rprice 1978 , not ) and is sometimes called the di/erence-in-di/erence estimate. Stephen Donald () Chapter 13: Panel/TS-CS 6 / 23
Pooled Cross Sections Policy Analysis We have seen this before via dummies and interaction: In the regression dummies for 1981 d 81 and location ( nearinc t ) rprice = β 0 + β 1 nearinc + β 2 d 81 + δ nearinc ± d 81 + u δ will capture the di/erence in the e/ect of nearinc in 1981 compared to its e/ect in 1978 When we run this regression we get the same estimate \$ 11 , 864 and a standard error of 7456 - the p-value is only 0.113 Stephen Donald () Chapter 13: Panel/TS-CS 7 / 23

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Pooled Cross Sections Policy Analysis If possible control for house characteristics That is run, rprice = β 0 + β 1 nearinc + β 2 d 81 + δ nearinc ± d 81 + other stu/ + u
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