d. To calculate the effect of the waste treatment plant on housing prices we est
ID: 3318852 • Letter: D
Question
d. To calculate the effect of the waste treatment plant on housing prices we estimate the difference-in-difference effect in a regression framework with the following results; we also change the dependent variable to log(rprice): (n 321) log(rprice,) = 1 1 .3 + .457 year81-340 nearplanh-0.063 year81 , X nearplantit (31) 045) .055 (.023) where year81 = l if the year is 1981, =0 if the year is 1978. What do the variables Jear81 and nearlant control for in this regression? Explain clearly and be specific in your answer. e. According to the regression in part (d), what is the effect of the waste treatment plant on house prices? Can this be interpreted as a causal effect? Explain.Explanation / Answer
(E) Here the waste treatment plant will significantly reduce the sale prices of hourses.
if nearplant = 0
log (rprice) = 11.3 + 0.457 * year81
lif nearplant = 1
log(rprice) = 11.3 + 0.457 * year81 - 0.340 + 0.063 * year81 = 10.96+ 0.52 year81
SO, that will decrease the sales prices if waste treatment is reduced. So, it can be interpreted as casual effect as becuase of nearness to waste treatment plant reduced the sales prices.
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