Richard Simmons established a sole proprietorship. The following transactions occurred during the month: Simmons invested $32,000 into the business…
September 3, 2020
Choose two countries that appear to be culturally diverse.
September 3, 2020

1. Difference in Difference Estimation

Let’s think about the bicycles experiment discussed in class. If you would like to refresh your memory, you can re-watch the video here: https://www.youtube.com/watch?v=6nG63ISt_Ek As a reminder, the policy gave bicycles to girls in the state of Bihar. Now suppose that you had attendance data for both girls and boys in Bihar and the neighboring state of Jharkhand but only AFTER the bikes policy was implemented.

a) [5 points] Suppose that you decided to measure the causal effect of the policy by comparing average attendance for girls in Bihar to average attendance for boys in Bihar. What is the identifying assumption?

b) [5 points] What is a specific example of something that would cause this identification assumption to be violated?

c) [5 points] Now suppose that you decided to measure the causal effect of the policy by comparing average attendance for girls in Bihar to average attendance for girls in Jharkhand. Remember, you only have data after the policy. What is the identifying assumption?

d) [5 points] What is a specific example of something that would cause this identification assumption to be violated?

e) [5 points] How could you implement a difference-in-difference estimator using these data? Please write down the estimator, defining your variables clearly.

f) [5 points] What is the identifying assumption? Please write this out in a full sentence that applies to this specific context. Remember again that there is no time dimension here.

g) [5 points] What is a specific example of something that would cause this identification assumption to be violated?

KM
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