You are the Economist of the office of Community Center at UCLA. In 2015, you im
ID: 3132042 • Letter: Y
Question
You are the Economist of the office of Community Center at UCLA. In 2015, you implemented a program of entrepeneurship in LA. Your design was such that the western region was offered that program, while the eastern region was not. The key variable that measures the performace of the program is the percentage of self-employed people.
You collected information regarding self-employment before and after the program, and the average percentage of self-employed people in each population is summarized in the Table below
inside of () is one value:
West. East.
2014. (0.21). (0.20)
2016. (0.29). (0.23)
(a) Compute the change in self-employment in the West and East, respectively.
(b) Calculate the difference of this change (obtained above) between the West and East. What will be the effect of the program in self-employment? Interpret.
To do it in econometrics, you prefer to present that information in a regression using dummies for region and time.
self_employed = B0 + B1 West + B2year2016+B3west x year2016 + error
(c) What is the value of each coechient B ? Which coefficient captures the effect of program in self-employment?
Explanation / Answer
(a) Compute the change in self-employment in the West and East, respectively.
Ans:
Change in West = 0.29 - 0.21 / 0.21
= 38.09%
Change in East = (0.23-0.20) / 0.20
= 15%
(b) Calculate the difference of this change (obtained above) between the West and East. What will be the effect of the program in self-employment? Interpret.
Ans: There is 23.09% more increase in west than in east.
The variables to be used in regression are not clearly explained. kindly explain them so that I can answer the third part as well.
(b) Calculate the difference of this change (obtained above) between the West and East. What will be the effect of the program in self-employment? Interpret.
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