Suppose that there are two countries, Beta and Gamma. Suppose further that everyone in country Beta is on Insurance B and everyone in country Gamma is on Insurance G. Suppose further that both governments use government-set price controls. In 2005, country Beta decided to change the reimbursement rate for pharmaceuticals, but country Gamma did not make this change. You, a researcher, want to study the effect of offering coverage for this drug had an impact on health expenditures. You have average health expenditures for State Beta and Gamma prior to 2005 and post-2005. Using the information in the table below, a quick difference-in-difference calculation suggests covering this drug ____ health expenditures by approximately
In 2005, country Beta decided to change the reimbursement rate for pharmaceuticals, but country Gamma did not make this change. You, a researcher, want to study the effect of offering coverage for this drug had an impact on health expenditures. You have average health expenditures for State Beta and Gamma prior to 2005 and post-2005. Using the information in the table below, a quick difference-in-difference calculation suggests covering this drug ____ health expenditures by approximately ____.
| State | Time Periods | |
| Pre-2005 | Post-2005 | |
| State Beta | $1000 | $1400 |
| State Gamma | $1500 | $1700 |
a. decreased; $400
b. increased; $200
c. increased; $400
d. decreased; $200
When individual-level randomization is not achievable, the difference-in-difference method can be helpful. Data from pre- and post-intervention, such as cohort or panel data or repeated cross-sectional data, are necessary for the study of DID.
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