• Many firms are small, and owned and run by families. Do family owned firms ten
ID: 1202880 • Letter: #
Question
• Many firms are small, and owned and run by families. Do family owned firms tend to grow more slowly, as measured by number of employees, than other firms?
• What is the effect of mortgage interest rates on the number of new housing developments?
For each of these questions answer the following:
(a) What is the outcome variable and what is the treatment?
(b) Define the counterfactual outcomes Y0i and Y1i .
(c) Define the group means E[Yi | Di= 1] and E[Yi |Di = 0]
(d) What are possible sources of selection bias in comparing outcomes by treatment status? Which way would you expect the bias to go and why?
Explanation / Answer
a. Yes, family owned firms tend to grow more slowly, as measured by number of employees, than other firms because it's employee strength is limited by the number of households which are limited as compared to other firms who hires from labour market.
b. There is a negitive relationship between mortgage interest rate and the number of new housing developments. So as the mortgage interest rates increases, the number of new housing developments decreases and vice-versa.
3.
a. outcome variable is the Dependent variable which is obtained by filling different values of explainatory variable in regression equation. and where Treatment is Independent/explainatory variable.
b. Y0i is counterfactual for stage 0- asit is the outcome that person i would have received if they were in stage 0
Similarly Y1i is counterfactual for person i who is in stage 1. It is the outcome they would have obtained had they been in stage 1.
c E[Yi | Di= 1] means the expected value of Yi conditional on Di having the value 1.
E[Yi | Di= 0] means the expected value of Yi conditional on Di having the value 0.
If you don't understand anything then comment, I'ill revert back on the same. Thanks :)
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.