1. Economics 1629 LECTURE 9: Diff in Diff
Daniel Björkegren

2. X Y

3. health = β0 + β1cigs + u For OLS to be valid: E[ui|Xi] = 0
OLS Validity
health = β0 + β1cigs + u For OLS to be valid: E[ui|Xi] = 0

4. X1 X2 Y X3 …

5. “Identification” X Y u

6. Rest of course Methods and Applications Difference in Differences
Fixed Effects
Instrumental Variables
Experiments
Assessing Evidence

7. How does the minimum wage affect employment?

8. Average employment per fast food restaurant Before and after minimum wage increase in NJPA
Before
20.44
23.33
After
21.03
21.17

9. Average employment per fast food restaurant Before and after minimum wage increase in NJ
20.44
After
21.03

10. Average employment per fast food restaurant Before and after minimum wage increase in NJPA
After
21.03
21.17

11. Average employment per fast food restaurant Before and after minimum wage increase in NJPA
Before
20.44
23.33
After
21.03
21.17

12. Computing Diff in Diff Difference in means Regression: In changes
Interaction

13. ci ftemp if state==1 & after==0; Variable | Obs Mean Std. Err
. ci ftemp if state==1 & after==0; Variable | Obs Mean Std. Err. [95% Conf. Interval] ‑‑‑‑‑‑‑‑‑+‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑ ftemp | ci ftemp if state==1 & after==1; ftemp | ci ftemp if state==0 & after==0; ftemp | ci ftemp if state==0 & after==1; ftemp | Diff in Diff Estimate =( )-( ) =2.75

14. Specification 1: Changes
Restaurant NJ
Change in Employment 1 2 4 . n -2

15. Specification 2: Interaction
Restaurant NJ
after
empl 1 20 22 2 19 23 . N 21

16. gener nj_after=nj. after;
. gener nj_after=nj*after; . reg ftemp nj after nj_after; Source | SS df MS Number of obs = 794 ‑‑‑‑‑‑‑‑‑+‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑ F( 3, 790) = 1.96 Model | Prob > F = Residual | R‑squared = ‑‑‑‑‑‑‑‑‑+‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑ Adj R‑squared = Total | Root MSE = ‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑ ftemp | Coef. Std. Err. t P>|t| [95% Conf. Interval] ‑‑‑‑‑‑‑‑‑+‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑ nj | ‑ ‑ ‑ ‑ after | ‑ ‑ ‑ nj_after | ‑ _cons |

17. Average employment per fast food restaurant Before and after minimum wage increase in NJPA
Before
After

19. Example: Los Angeles (Jin and Leslie, 2001)
New law: restaurants in LA county required to post hygiene score cards in the window
Outcomes we care about?
- consumer choice
- restaurant cleanliness
- health
Treatment
Compare before and after. What else?

20. Example: Meyer, Viscusi, Durbin 1995
What is the effect of increasing disability payments?
Policy implemented: increase maximum
Before and after
High earners hit the maximum, low earners do not

22. New York
1849

23. 1854 London Cholera Outbreak
John Snow

24. “37 Broad Street. Mr Eley, the percussion-cap manufacturer of 37 Broad Street informed me that he had long noticed that the water became offensive, both to smell and taste, after it had been kept about two days. This as I noticed before, is a character of water contaminated with sewage. Another person had noticed for months that a film formed on the surface of the water when it had been kept a few hours.”
Elsewhere
“Brewery on Broad Street. There is a brewery on Broad Street, near to the pump, an on perceiving that no brewer’s men were registered as having died of cholera, I called on Mr Hugguns, the proprietor [...] the men were allowed a certain quantity of malt liquor, and Mr Hugguns believed they do not drink water at all; and he is quite certain that the workmen never obtained the water from the pump in the street. There is a deep well in the brewery, in addition to the New River Water.”

26. Deaths from Cholera
1849
1854

29. Reading an empirical study
What is the question?
Why does it matter?
What is the identification problem?
What is the identification strategy?
How does it address the problem?
What are the results?
What are the policy implications?

30. Reading with purpose Introduction is most valuable
How did they measure this?
“Data”
How did they analyze this?
“Estimation,” “Results”
Did they account for the relevant threats?
What do the results suggest about policies or future work?
“Conclusion”

31. For Monday:
How does immigration affect existing workers? Read: Card 1990: Impact of Mariel Boatlift on the Miami labor market Send 3 discussion points to: