card_krueger - Introduction • Up to now – Focus has...

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1 1 Applications: Card and Krueger Using Statistics to Test Economic Hypotheses 2 Introduction • Up to now – Focus has been on acquiring technique – End point – • Constructing confidence intervals for means and difference in means • Testing hypotheses • These are basic tools in empirical analysis – Used in all social and physical sciences – Although basic, in many cases, just what is needed 3 Next few days • Examine some simple yet important articles in applied economics • Articles have similar characteristics – Address interesting questions – “Experiments” yield data that can test hypotheses with difference in means – Not typical article -- most statistical tests economics are more sophisticated – There are however illustrative of the types of questions that can be answered 4 What you should focus on? • What is the economic question? – What is the null hypothesis? • How is the data collected? • What assumptions must be correct for the test to be an unbiased estimate of the “treatment” effect?
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2 5 Minimum wage laws • Minimum wage laws imposed by state, local and Federal governments • “covered” sector includes most jobs • States/locals can raise but not lower Federal minimum wage • Current Federal minimum wage, $5.15/hour 6 Some State Minimum Wage Laws • DE $6.15/hour • DC $6.15 • ME $6.25 • MA $6.75 • OR $6.50 • WA $6.90 7 W L W e W m L d L e L s S D 8 Textbook model of Minimum Wage • Original conditions: W e , L e • Minimum wage imposed, W m >W e • Labor supply: higher wage encourages
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card_krueger - Introduction • Up to now – Focus has...

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