5. Consider the experience of a hypothetical state we will call state A. Between periods 1 and 2, state A increased the maximum weekly benefits under its workers' compensation program from Bmax to Bmax', which is illustrated in the graph. Workers' compensation is a form of insurance that provides cash benefits to employees who suffer work-related injuries to replace a fraction of their lost wages until they are able to return to work. The weekly benefit is an increasing function of the pre-injury weekly wage, subject to floor and ceiling benefit amounts. Weekly benefit Bmax' Bmax Bmin wl w2 w3 Pre-injury weekly wage You are interested in estimating the effect of benefit generosity on injury duration. You recognize that the policy change provides you with an opportunity to implement a difference-in- differences estimation strategy. a. Carefully explain how you would calculate your difference-in-differences estimate. b. What assumptions do you need for your estimate to be valid as a causal estimate of the impact of the effect of benefit generosity on injury duration?

5. Consider the experience of a hypothetical state we will call state A. Between periods 1 and 2, state A increased the maximum weekly benefits under its workers' compensation program from Bmax to Bmax', which is illustrated in the graph. Workers' compensation is a form of insurance that provides cash benefits to employees who suffer work-related injuries to replace a fraction of their lost wages until they are able to return to work. The weekly benefit is an increasing function of the pre-injury weekly wage, subject to floor and ceiling benefit amounts. Weekly benefit Bmax' Bmax Bmin wl w2 w3 Pre-injury weekly wage You are interested in estimating the effect of benefit generosity on injury duration. You recognize that the policy change provides you with an opportunity to implement a difference-in- differences estimation strategy. a. Carefully explain how you would calculate your difference-in-differences estimate. b. What assumptions do you need for your estimate to be valid as a causal estimate of the impact of the effect of benefit generosity on injury duration?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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