Gustavo is the mayor of Guadalajara, Mexico. He is concerned that violent crime is reducing income because people are afraid to invest in their businesses. In order to address this problem, Gustavo created a Neighborhood Watch program that increases the number of police officers patrolling the streets. Before expanding the program to the entire city of Guadalajara, Gustavo first implemented a pilot version of the Neighborhood Watch program in the 25 neighborhoods with the highest crime rates. Gustavo then hired Priyal, a famous economist, to conduct an impact evaluation to see how well the program worked. For her impact evaluation, Priyal surveyed a random sample of 500 businesses from the neighborhoods where the Neighborhood Watch program operated. She found that the average income of these 500 business was $12,000. neighborhoods that did not participate in the Neighborhood Watch program. She found that the average income of these 500 business was $18,000. She surveyed another random sample of 500 businesses from nearby 6. Use this information to fill in the appropriate two cells in the table below (leave the other two cells blank). D = 0 D = 1
Gustavo is the mayor of Guadalajara, Mexico. He is concerned that violent crime is reducing income because people are afraid to invest in their businesses. In order to address this problem, Gustavo created a Neighborhood Watch program that increases the number of police officers patrolling the streets. Before expanding the program to the entire city of Guadalajara, Gustavo first implemented a pilot version of the Neighborhood Watch program in the 25 neighborhoods with the highest crime rates. Gustavo then hired Priyal, a famous economist, to conduct an impact evaluation to see how well the program worked. For her impact evaluation, Priyal surveyed a random sample of 500 businesses from the neighborhoods where the Neighborhood Watch program operated. She found that the average income of these 500 business was $12,000. neighborhoods that did not participate in the Neighborhood Watch program. She found that the average income of these 500 business was $18,000. She surveyed another random sample of 500 businesses from nearby 6. Use this information to fill in the appropriate two cells in the table below (leave the other two cells blank). D = 0 D = 1
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![**Impact Evaluation of Neighborhood Watch Program in Guadalajara**
Gustavo is the mayor of Guadalajara, Mexico. He is concerned that violent crime is reducing income because people are afraid to invest in their businesses. In order to address this problem, Gustavo created a Neighborhood Watch program that increases the number of police officers patrolling the streets. Before expanding the program to the entire city of Guadalajara, Gustavo first implemented a pilot version of the Neighborhood Watch program in the 25 neighborhoods with the highest crime rates. Gustavo then hired Priyal, a famous economist, to conduct an impact evaluation to see how well the program worked.
For her impact evaluation, Priyal surveyed a random sample of 500 businesses from the neighborhoods where the Neighborhood Watch program operated. She found that the average income of these 500 businesses was $12,000. She surveyed another random sample of 500 businesses from nearby neighborhoods that did not participate in the Neighborhood Watch program. She found that the average income of these 500 businesses was $18,000.
**6. Use this information to fill in the appropriate two cells in the table below (leave the other two cells blank).**
| | \(D_i = 0\) | \(D_i = 1\) |
|------------------------|---------------|--------------|
| \(E[Y_{0i}|D_i]\) | | |
| \(E[Y_{1i}|D_i]\) | | 12,000 |
| \(E[Y_{0i}|D_i]\) | 18,000 | |
| \(E[Y_{1i}|D_i]\) | | |
**7. What is the value of the Naïve Average Treatment Effect?**
The Naïve Average Treatment Effect (NATE) is calculated as the observed difference in average outcomes between the treatment group and the control group.
\[ \text{NATE} = E[Y_{1i}|D_i=1] - E[Y_{0i}|D_i=0] = 12,000 - 18,000 = -6,000 \]
**8. Do you believe that the Naïve Average Treatment Effect you calculated above will be characterized by positive, negative, or zero selection bias? Write “positive”, “negative”, or “zero” and justify your answer in the box below.**
The NATE calculated is likely to be characterized by **negative** selection](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9ed5a4b1-5b75-4e1a-af8e-7dfe45088af1%2F5215b64d-c96f-482b-a140-edc8b6963ecf%2Fh3rni8_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Impact Evaluation of Neighborhood Watch Program in Guadalajara**
Gustavo is the mayor of Guadalajara, Mexico. He is concerned that violent crime is reducing income because people are afraid to invest in their businesses. In order to address this problem, Gustavo created a Neighborhood Watch program that increases the number of police officers patrolling the streets. Before expanding the program to the entire city of Guadalajara, Gustavo first implemented a pilot version of the Neighborhood Watch program in the 25 neighborhoods with the highest crime rates. Gustavo then hired Priyal, a famous economist, to conduct an impact evaluation to see how well the program worked.
For her impact evaluation, Priyal surveyed a random sample of 500 businesses from the neighborhoods where the Neighborhood Watch program operated. She found that the average income of these 500 businesses was $12,000. She surveyed another random sample of 500 businesses from nearby neighborhoods that did not participate in the Neighborhood Watch program. She found that the average income of these 500 businesses was $18,000.
**6. Use this information to fill in the appropriate two cells in the table below (leave the other two cells blank).**
| | \(D_i = 0\) | \(D_i = 1\) |
|------------------------|---------------|--------------|
| \(E[Y_{0i}|D_i]\) | | |
| \(E[Y_{1i}|D_i]\) | | 12,000 |
| \(E[Y_{0i}|D_i]\) | 18,000 | |
| \(E[Y_{1i}|D_i]\) | | |
**7. What is the value of the Naïve Average Treatment Effect?**
The Naïve Average Treatment Effect (NATE) is calculated as the observed difference in average outcomes between the treatment group and the control group.
\[ \text{NATE} = E[Y_{1i}|D_i=1] - E[Y_{0i}|D_i=0] = 12,000 - 18,000 = -6,000 \]
**8. Do you believe that the Naïve Average Treatment Effect you calculated above will be characterized by positive, negative, or zero selection bias? Write “positive”, “negative”, or “zero” and justify your answer in the box below.**
The NATE calculated is likely to be characterized by **negative** selection
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