Is your finding in part (b) in line with the theoretical prediction of the simple model in part (a)? Explain why your empirical findings in part (b) could be different from the theoretical prediction in part (a)?
Answer C only please
On December 30, 1974, the hypothetical country Alpha decided to introduce a minimum wage policy. Cities with ID numbers 11, 23, 45, 57, 60, and 61 were randomly chosen to implement this minimum wage policy. The remaining cities in country Alpha did not adopt a minimum wage policy. You are asked to empirically and theoretically evaluate the impact of the introduction of the minimum wage in country Alpha on the labour market outcomes.
a) Assuming there is no labour mobility and using the basic model of minimum wage, how do you expect the introduction of this policy to change the existing equilibrium wage and employment rate in the affected cities?
MY ANSWER IS
b)You are then asked to empirically evaluate the impact of the implementation of the minimum wage policy on employment rate in cities that implemented the new legislation compared to the other cities. Use data only from 1974, and 1975 in your policy evaluation. First, write down a regression model, and then estimate the model using Stata. Interpret all the coefficients as well as the intercept in your model.
I GET NEGATIVE COEFFICIENT for employment THAT SUPPORTS MY ANSWER IN A
c) Is your finding in part (b) in line with the theoretical prediction of the simple model in part (a)? Explain why your empirical findings in part (b) could be different from the theoretical prediction in part (a)?
ANSWER C PLS ONLY for why part (b) could be different from the theoretical prediction in part (a)?
Step by step
Solved in 2 steps
