4. (8 points) An economist seeks to calculate a differences-in-differences estim

Question

4. (8 points) An economist seeks to calculate a differences-in-differences estimate for the effect of a training program on earnings. Workers are randomly assigned to a treatment group and a control group. Workers in the treatment group receive training, but workers in the control group do not. The training program takes place in 2005. The average wage of workers in the control group is 100 in 2004 and 200 in 2006. The average wage of workers in the treatment group is 110 in 2004 and 290 in 2006.

Explanation / Answer

ANSWER:

a) Average Wage of control group in 2004 = 100

Average Wage of control group in 2006 = 200

increase in Average wage in control group = 200 - 100 = 100

Average Wage of treatment group in 2004 = 110

Average Wage of treatment group in 2006 = 290

increase in Average wage in treatment group = 290 - 110 = 180

B) Increae on average wage of treatment group = 180

Increase in average wage of control group = 100

Increae on average wage of treatment group - Increase in average wage of control group = 180 - 100 = 80

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