Two Authors Published a Study in 1992 of the Effect

question 15

Essay

Two authors published a study in 1992 of the effect of minimum wages on teenage
employment using a U.S.state panel.The paper used annual observations for the years
1977-1989 and included all 50 states plus the District of Columbia.The estimated
equation is of the following type $$E _ { i t } = \beta _ { 0 } + \beta _ { 1 } \left( M _ { i t } / W _ { i t } \right) + \gamma _ { 2 } D 2 _ { i } + \ldots + \gamma _ { n } D 51 _ { i } + \delta _ { 2 } B 2 _ { t } + \ldots + \delta _ { \mathrm { T } } \mathrm { B } 13 _ { \mathrm { t } } + u _ { i t }$$ where E is the employment to population ratio of teenagers, M is the nominal minimum
wage, and W is average wage in the state.In addition, other explanatory variables, such
as the prime-age male unemployment rate, and the teenage population share were
included.
(a)Briefly discuss the advantage of using panel data in this situation rather than pure cross
sections or time series.

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