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# PS#5 - 1 Jinkyu Ha EEP 118 PS#5 Exercise 1(a High income...

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Jinkyu Ha EEP 118 PS #5 11/16/10 Exercise 1 (a) After policy Before policy Difference High income 13.41 6.75 6.66 Low income 6.81 5.90 0.91 Difference 6.6 0.85 5.75 The difference of the mean duration of benefits between before and after the policy is highly statistically significant for the high-income earners, based on p-value of 0.0027, but is not significantly different for the low-income earners, based on p-valued of 0.3420. (b) Durat = β 0 + β1highearn + β 2 afchnge + β 3 (afchnge* highearn) + u Durat^ = 5.90 + 0.85highearn + 0.91afchnge + 5.75(afchnge*highearn) - β 0 gives the average duration of benefits for low-income earners before the policy change - β 1 gives the difference in average duration of benefits between high-income and low-income earners before the policy change - β 2 gives the difference in average duration of benefits before and after the policy change for the low-income earners - β 3 gives the difference in average duration of benefits before and after the policy change for high- income earners versus low-income earners. Based on p-value of 0.577, we can conclude that both high-income and low-income earners had the same duration of benefits on average. High-income earners got significantly more benefits from the policy change, based on p-value of 0.009, but we cannot say that low-income earners were affected by the policy change, based on p-value of 0.519. With the policy change, high-income earners’ duration of benefits became twice longer.

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PS#5 - 1 Jinkyu Ha EEP 118 PS#5 Exercise 1(a High income...

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