《计量经济学导论》Chapter 13.pptVIP

Chapter 13 ;Policy analysis with pooled cross sections Two or more independently sampled cross sections can be used to evaluate the impact of a certain event or policy change Example: Effect of new garbage incinerator on housing prices Examine the effect of the location of a house on its price before and after the garbage incinerator was built: ;Example: Garbage incinerator and housing prices (cont.) It would be wrong to conclude from the regression after the incinerator is there that being near the incinerator depresses prices so strongly One has to compare with the situation before the incinerator was built: In the given case, this is equivalent to This is the so called difference-in-differences estimator (DiD) ;Difference-in-differences in a regression framework In this way standard errors for the DiD-effect can be obtained If houses sold before and after the incinerator was built were sys-tematically different, further explanatory variables should be included This will also reduce the error variance and thus standard errors Before/After comparisons in ?natural experiments“ DiD can be used to evaluate policy changes or other exogenous events;Policy evaluation using difference-in-differences ;Two-period panel data analysis Example: Effect of unemployment on city crime rate Assume that no other explanatory variables are available. Will it be possible to estimate the causal effect of unemployment on crime? Yes, if cities are observed for at least two periods and other factors affecting crime stay approximately constant over those periods: ;Example: Effect of unemployment on city crime rate (cont.) Estimate differenced equation by OLS: ;Discussion of first-differenced panel estimator Further explanatory variables may be included in original equation Note that there may be arbitrary correlation between the unobserved time-invariant characteristics and the included explanatory variables OLS in the original equation would therefore be inconsistent The first-differenced