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Stata problem set, Stata problem set, Exercises of Econometrics and Mathematical Economics

Madan Mohan Malaviya University of TechnologyEconometrics and Mathematical Economics

Stata problem set, Stata problem set

Typology: Exercises

2024/2025

Uploaded on 06/16/2025

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EC230A Hilary Hoynes
Winter 2013 hwhoynes@ucdavis.edu
Empirical Problem Set 1
Due: Thursday Feb 14
You are welcome to collaborate on the problem set. You can share do/log files but please write
up your own results.
This problem set is replication/extension of the Eissa and Liebman paper:
Eissa and Liebman, "Labor Supply Response to the Earned Income Tax Credit,"
QJE, 1996.
In EL (Eissa&Liebman) they use difference in difference techniques to examine the 1986
expansion of the Earned Income Tax Credit (EITC). In this exercise we apply their technique to
analyze the 1993 expansion of the EITC.
We will estimate models like in EL for the 1993 expansion. In EL, the treatment group is single
women with children, and the control is single women without children. We will estimate the
same model. As an extension we will also estimate models where the treatment effect is allowed
to differ between those with 1 versus 2+ children.
We have data for 1991-1996. We will assume that the before expansion years are 1991-1993
and the after expansion sample is 1994-1996.
We will use STATA for the problem set. You should have downloaded the STATA data set
ps1.dta.
Make sure you attach your Stata code with your completed problem set. That way I can figure
out where you went wrong (if you do) …
Data set overview
The data set consists of a sample of single women ages 20-54 with less than a high school
education covering the years 1991-1996 from the Current Population Survey.
(Note EL estimates models separately for different education groups. We only have the lowest
education group. Ignore their results by education group.)
Here is output from the STATA command DESCRIBE which lists the variables in the data set
along with their definitions.
. describe
Contains data from ps1.dta
obs: 13,746
vars: 11
size: 618,570 (40.8% of memory free)
pf3
pf4

Partial preview of the text

Download Stata problem set, Stata problem set and more Exercises Econometrics and Mathematical Economics in PDF only on Docsity!

EC230A Hilary Hoynes Winter 2013 hwhoynes@ucdavis.edu

Empirical Problem Set 1

Due: Thursday Feb 14

You are welcome to collaborate on the problem set. You can share do/log files but please write up your own results.

This problem set is replication/extension of the Eissa and Liebman paper:

Eissa and Liebman, "Labor Supply Response to the Earned Income Tax Credit," QJE , 1996.

In EL (Eissa&Liebman) they use difference in difference techniques to examine the 1986 expansion of the Earned Income Tax Credit (EITC). In this exercise we apply their technique to analyze the 1993 expansion of the EITC.

We will estimate models like in EL for the 1993 expansion. In EL, the treatment group is single women with children, and the control is single women without children. We will estimate the same model. As an extension we will also estimate models where the treatment effect is allowed to differ between those with 1 versus 2+ children.

We have data for 1991-1996. We will assume that the before expansion years are 1991- and the after expansion sample is 1994-1996.

We will use STATA for the problem set. You should have downloaded the STATA data set

ps1.dta.

Make sure you attach your Stata code with your completed problem set. That way I can figure out where you went wrong (if you do) …

Data set overview

The data set consists of a sample of single women ages 20-54 with less than a high school education covering the years 1991-1996 from the Current Population Survey. (Note EL estimates models separately for different education groups. We only have the lowest education group. Ignore their results by education group.)

Here is output from the STATA command DESCRIBE which lists the variables in the data set along with their definitions.

. describe

Contains data from ps1.dta obs: 13, vars: 11 size: 618,570 (40.8% of memory free)

storage display value variable name type format label variable label

state float %9.0g State of Residence year float %9.0g Year [taxyear] urate float %9.0g State Unemp Rate children byte %8.0g Number of Children nonwhite byte %8.0g Dummy=1 if Hispanic/Black finc double %10.0g Annual Family Income (97$) earn double %10.0g Annual earnings (97$) age byte %8.0g Age of woman ed byte %8.0g Years of education work byte %8.0g Dummy =1 if Employed last year unearn double %10.0g Unearned Income (97$)

Sorted by:

All dollar amounts are in 1997 dollars.

  1. Describe the 1993 expansion of the EITC. What does theory predict about the impact of this EITC expansion on the labor supply of single women with children? Discuss the predictions for the intensive and extensive margins. Would you expect a difference by family size? Why or why not. Explain.

  2. Construct variables for difference-in-difference analysis as in EL equation 1. You will need a variable for the “treatment” (call it ANYKIDS ) and for after the expansion (call it POST93). Calculate the sample means by presence of children as in Table 1 of EL. Discuss the differences in the sample between single women with and without children. Calculate sample means separately for single women with 1 versus 2 or more children. How do the samples differ?

[Don’t worry about the variables that are in EL that are not in the input data set. The variables in their Table I that you do not have are: preschool children, weekly participation, and hours of work. You can create filing unit size = number of children + 1 (for the woman). You can create earnings conditional on work from earnings.]

  1. Estimate the impacts of the EITC on employment using a “single difference” model. In particular, take one after year (1996) and compare the employment of single women with kids to single women without kids. Estimate the unconditional “single difference” in a regression framework. What do you find? Given the information in (2) above, how might this estimate be biased?

  2. Create a graph which plots mean annual employment rates by year (1991-1996) for single women with children (treatment) and single women without children (control). Discuss the differences that show up in the graph. Use this information to critique the validity of using single women without children as the control group. In particular examine the “pre-treatment” trends and how they differ by group.

  3. Given the difference in mean employment rates by group in (4) it may be hard to analyze the results. Instead, estimate a regression with a full set of time dummies

  1. Add unemployment rate and allow its impact to vary by presence of children. (Like in EL column 3.) How do your results change? What does it tell you about the importance of cycles and how they affect the different groups?

  2. Add state fixed effects to model. Given the research design in the paper, would you expect adding state fixed effects to change the EITC effect?

  3. Allow the treatment effect to vary by those with 1 or 2+ children. What do you find? Looking back at the EITC expansion, what do you expect to find? Does this make sense?

  4. Suppose you are concerned about the validity of women without children as a control group. Instead you use families with 2+ children as the treatment group and families with 1 child as the control group. Estimate the treatment effect controlling for all variables you have in (12). What do you find and how does it differ from the results in (13)? How sensitive are these results to whether you allow the unemployment rate effect to vary with those with 1, vs 2+ children? Discuss.

  5. As you did in (5), examine the trends in the main T and C groups. But now do it in the conditional model (conditioning on the Xs you have in 13). How do the trends change?

Hint: Drop POST and replace with a full set of year effects. Drop ANYKIDS and replace with full set of year effects interacted with ANYKIDS.

  1. Estimate a "placebo" treatment model. In particular take data from the pre period only. The treatment and control groups are unchanged. But the "placebo post" period begins in 1992 (or you can try 1993). What do you find?