Suppose you observe that several different communities in a large metropolitan area raised their sales tax by one percentage point in 2012 while several others did not.In an effort to determine how the increase affected car sales in the affected communities you estimate a difference-in-difference estimator for 2011 and 2013 car sales and get $$\begin{array} { l }
\text { Car Sales }_{i}=&987.25+&17.082013_{i}+&1.47 \text { Treatment }_{i}-&8.32(2013 * \text { Treatment })_{i}\
&(311.24) &(5.33)&(0.56)&(2.46) \
\end{array}$$
a)Why would you want to estimate a difference in difference model?
b)Draw a graph with the 4 means on it and explain where the difference in difference estimator is on the graph.

Question

Suppose you observe that several different communities in a large metropolitan area raised their sales tax by one percentage point in 2012 while several others did not.In an effort to determine how the increase affected car sales in the affected communities you estimate a difference-in-difference estimator for 2011 and 2013 car sales and get $$\begin{array} { l } 
\text { Car Sales }_{i}=&987.25+&17.082013_{i}+&1.47 \text { Treatment }_{i}-&8.32(2013 * \text { Treatment })_{i}\
&(311.24) &(5.33)&(0.56)&(2.46)  \
\end{array}$$ 
a)Why would you want to estimate a difference in difference model?
b)Draw a graph with the 4 means on it and explain where the difference in difference estimator is on the graph.

Quizplus · Accepted Answer

The Answer of Suppose you observe that several different communities in a large metropolitan area raised their sales tax by one percentage point in 2012 while several others did not.In an effort to determine how the increase affected car sales in the affected communities you estimate a difference-in-difference estimator for 2011 and 2013 car sales and get $$\begin{array} { l } 
\text { Car Sales }_{i}=&987.25+&17.082013_{i}+&1.47 \text { Treatment }_{i}-&8.32(2013 * \text { Treatment })_{i}\
&(311.24) &(5.33)&(0.56)&(2.46)  \
\end{array}$$ 
a)Why would you want to estimate a difference in difference model?
b)Draw a graph with the 4 means on it and explain where the difference in difference estimator is on the graph.

Suppose You Observe That Several Different Communities in a Large