Consider the following difference-in-differences estimator for the effect of a new garbage incinerator on housing values. Rumor of a new incinerator being built in a town in Massachusetts began after 1978, and construction began in 1981. You have data on prices of houses that sold in 1978, and another sample of those that sold in 1981. You define a dummy variable (y81) as equal to 1 if the house sold in 1981, and zero if the house sold in 1978. Your hypothesis is that the price of houses located near the incinerator will fall across those years relative to the price of more distant houses. You define a house as being near the incinerator (nearinc) if it is within 3 miles of it. Housing price (price) is measured in real terms, in 1978 dollars. You estimate the following regression (standard errors are in parentheses): price = 82,517.23 + 18,790.29y81 -18,824.37nearinc (2,726.91) (4,050.07) (4,875.32) -11,863.90(y81 * nearinc) (7,456.65) n=321 Interpret the coeffiecient on nearinc, commenting on both magnitude and statistical significance.
Consider the following difference-in-differences estimator for the effect of a new
garbage incinerator on housing values. Rumor of a new incinerator being built in a town
in Massachusetts began after 1978, and construction began in 1981. You have data on
prices of houses that sold in 1978, and another sample of those that sold in 1981. You
define a dummy variable (y81) as equal to 1 if the house sold in 1981, and zero if the
house sold in 1978. Your hypothesis is that the price of houses located near the
incinerator will fall across those years relative to the price of more distant houses. You
define a house as being near the incinerator (nearinc) if it is within 3 miles of it. Housing
price (price) is measured in real terms, in 1978 dollars. You estimate the following
regression (standard errors are in parentheses):
price = 82,517.23 + 18,790.29y81 -18,824.37nearinc
(2,726.91) (4,050.07) (4,875.32)
-11,863.90(y81 * nearinc)
(7,456.65)
n=321
Interpret the coeffiecient on nearinc, commenting on both magnitude and statistical significance.
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