Problem set to Lecture 3
Estimate labour demand elasticity
Data
This exercise uses public data from Card and Krueger (1994) that can be downloaded from https://davidcard.berkeley.edu/data_sets.html. The ZIP file with dataset contains space-delimited public.dat file. You can import it into Stata using import delimited command or into R using read.table() function. The description of vairables (in same order as they appear in the data) is given in codebook text file.
The objective is to replicate and analyse the results presented in Tables 3 and 4 in Card and Krueger (1994).
Compute full-time equivalent (FTE) employment as the number of full-time workers (including managers) plus 0.5 times the number of part-time workers.
Replicate first three columns in Table 3, including the sensitivity to using balanced sample of stores and setting employment to 0 in temporarily closed stores.
Calculate proportion of full-time employees in FTE employment in each state and period. Then, calculate the differences in proportions over time in each state, between states in each period and difference-in-differences.
Compare the results to the predictions of standard labour demand theories. Discuss possible explanations for the discrepancies.
Discuss possible issues with the dataset and/or estimation strategy. Suggest ways to mitigate the issues and explain how they would help improve the estimates.