The New Jersey-Pennsylvania Study on the Effect of Minimum Wages

question 35

Essay

The New Jersey-Pennsylvania study on the effect of minimum wages on employment mentioned in your textbook used a comparison in means "before" and "after" analysis.The difference-in-difference estimate turned out to be 2.76 with a standard error of 1.36.
The authors also used a difference-in-differences estimator with additional regressors of the type
ΔYi = β0 + β1Xi + β2W1,t + ...+ β1+ rWr,i + ui
where i = 1,…,410.X is a binary variable taking on the value one for the 331 observations in New Jersey.Since the authors looked at Burger King,KFC,Wendy's,and Roy Rogers fast food restaurants and the restaurant could be company owned,four W-variables were added.
(a)Given that there are four chains and the possibility of a company ownership,why did the authors not include five W-variables?
(b)OLS estimation resulted in 1 of 2.30 with a standard error of 1.20.Test for statistical significance and specify the alternative hypothesis.
(c)Why is this estimate different from the number calculated from Δ - Δ = 2.76? What is the advantage of employing this estimator of the simple difference-in-difference estimator?

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Definitions:

Abolitionist Petitions

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Slave Trade

The historical trade of enslaved people, particularly across the Atlantic Ocean from Africa to the Americas, that peaked in the 17th to 19th centuries, involving millions of Africans being forcibly transported and sold.

Independent Treasury Bill

Legislation passed in 1840 and later in 1846 establishing a system where the U.S. government managed its own funds independently of private banks, storing money in Treasury buildings.