Density 5.0e-05 1.0e-04 1.5e-04 70000 72500 75000 Annual income 77500 80000 Problem 1 Regression Discontinuity In the beginning of covid, the US government distributed covid stimulus payments. Suppose you are interested in the effect of receiving the full amount of the first stimulus payment on the total spending in dollars by single individuals in the month after receiving the payment. Single individuals with annual income below $75,00 received the full amount of the stimulus payment. You decide to use Regression Discontinuity to answer this question. The graph below shows the RD model. 3150 3100 3050 Total Spending in the month after receiving the stimulus payment 2950 3000 74000 74500 75000 75500 76000 Annual income a. What is the outcome? (5 points) b. What is the treatment? (5 points) C. What is the running variable? (5 points) d. What is the cutoff? (5 points) e. Who is in the treatment group and who is in the control group? (10 points) f. What is the discontinuity in the graph and how do you interpret it? (10 points) g. Explain a scenario which can cause manipulation of the running variable around the cutoff. (5 points) h. You are worried about perfect manipulation of the running variable and decide to test for manipulation. Based on the histogram on the next page do you think that there is manipulation of the running variable around the cutoff? Explain. (10 points)
Density 5.0e-05 1.0e-04 1.5e-04 70000 72500 75000 Annual income 77500 80000 Problem 1 Regression Discontinuity In the beginning of covid, the US government distributed covid stimulus payments. Suppose you are interested in the effect of receiving the full amount of the first stimulus payment on the total spending in dollars by single individuals in the month after receiving the payment. Single individuals with annual income below $75,00 received the full amount of the stimulus payment. You decide to use Regression Discontinuity to answer this question. The graph below shows the RD model. 3150 3100 3050 Total Spending in the month after receiving the stimulus payment 2950 3000 74000 74500 75000 75500 76000 Annual income a. What is the outcome? (5 points) b. What is the treatment? (5 points) C. What is the running variable? (5 points) d. What is the cutoff? (5 points) e. Who is in the treatment group and who is in the control group? (10 points) f. What is the discontinuity in the graph and how do you interpret it? (10 points) g. Explain a scenario which can cause manipulation of the running variable around the cutoff. (5 points) h. You are worried about perfect manipulation of the running variable and decide to test for manipulation. Based on the histogram on the next page do you think that there is manipulation of the running variable around the cutoff? Explain. (10 points)
Chapter2: Mathematics For Microeconomics
Section: Chapter Questions
Problem 2.9P
Related questions
Question
Transcribed Image Text:Density
5.0e-05
1.0e-04
1.5e-04
70000
72500
75000
Annual income
77500
80000
Transcribed Image Text:Problem 1
Regression Discontinuity
In the beginning of covid, the US government distributed covid stimulus payments. Suppose
you are interested in the effect of receiving the full amount of the first stimulus payment on
the total spending in dollars by single individuals in the month after receiving the payment.
Single individuals with annual income below $75,00 received the full amount of the stimulus
payment.
You decide to use Regression Discontinuity to answer this question. The graph below shows
the RD model.
3150
3100
3050
Total Spending in the month after receiving the stimulus payment
2950
3000
74000
74500
75000
75500
76000
Annual income
a. What is the outcome? (5 points)
b. What is the treatment? (5 points)
C. What is the running variable? (5 points)
d. What is the cutoff? (5 points)
e. Who is in the treatment group and who is in the control group? (10 points)
f. What is the discontinuity in the graph and how do you interpret it? (10 points)
g. Explain a scenario which can cause manipulation of the running variable around the
cutoff. (5 points)
h. You are worried about perfect manipulation of the running variable and decide to test
for manipulation. Based on the histogram on the next page do you think that there is
manipulation of the running variable around the cutoff? Explain. (10 points)
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