Econ140A_Sample_FINAL_key

# Econ140A_Sample_FINAL_key - Rebecca Toseland Mathurin Som...

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Rebecca Toseland Mathurin Somé Answer Key Sample FINAL S2011

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Problem 6 a) Period Δexpend t Δ crime t 1 1 - 0.023 2 0 0.76*(- 0.023)= -0.01748 3 0 0.76 2 *(- 0.023)=0.76*( -0.01748) = -0.01328 4 0 0.76 3 *(- 0.023)=0.76*( -0.01328) = -0.0101

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b) For this, use the formula from the last slide of the functional forms lecture for a sustained change in an independent variable (spending on law enforcement) in the presence of a lagged dependent variable: 1 x y t For this question, the formula would be 3 2 1 x y t which gives 76 . 0 1 023 . 0 1 3 2 = -0.09583. This means that if the city spends one more dollar each year on law enforcement that 0.09583 fewer crimes per 10,000 residents will be committed. Equivalently, if the city spends \$1000 more on law enforcement each year, 95.83 few crimes per 10,000 residents will be committed (or just under a 1% reduction in crime). Not an awful return for the investment. Problem 7
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## This note was uploaded on 12/26/2011 for the course ECON 140a taught by Professor Staff during the Fall '08 term at UCSB.

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Econ140A_Sample_FINAL_key - Rebecca Toseland Mathurin Som...

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