Your Textbook Mentions Use of a Quasi-Experiment to Study the Effects

question 7

Essay

Your textbook mentions use of a quasi-experiment to study the effects of minimum wages on employment using data from fast food restaurants. In 1992, there was an increase in the (state) minimum wage in one U.S. state (New Jersey) but not in neighboring location (Eastern Pennsylvania). To calculate the $\widehat { \beta } _ { 1 } ^ { \text {diffs-in-diffs } }$ you need the change in the treatment group and the change in the control group. To do this, the study provides you with the following information

$\begin{array}{|l|c|c|} \hline& \text { PA } & \text { NJ } \\ \hline \begin{array}{l}\text { FTE Employment } \\\text { before }\end{array} & 23.33 & 20.44 \\\hline \begin{array}{l}\text { FTE Employment } \\\text { after }\end{array} & 21.17 & 21.03 \\\hline\end{array}$

Where $F T E$ is "full time equivalent" and the numbers are average employment per restaurant. W
(a) Calculate the change in the treatment group, the change in the control group, and finally $\widehat { \beta } _ { 1 } ^ { d i f f - i n - d i f f s }$ . Since minimum wages represent a price floor, did you expect $\widehat { \beta } _ { 1 } ^ { d i f f s - i n - d i f f s }$ to be positive or negative?

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Definitions:

Currency Exchange Rate

The rate at which one currency can be exchanged for another, often determined by national economies and global market conditions.

Japanese Yen

The official currency of Japan, which plays a significant role in international finance and trade.

Political Stability

A condition where a government is stable, capable of maintaining order, and there is an absence of political turmoil or frequent government change.

Internal Political Strife

Conflict among members within the same organization or group, often hindering progress or decision-making.