1. You need to use two data sets for this exercise, JTRAIN2 and JTRAIN3. The former is the outcome of a job training experiment. The file JTRAIN3 contains observational data, where individuals themselves largely determine whether they participate in job training. The data sets cover the same time period.
(i) In the data set JTRAIN2, what fraction of the men received job training? What is the fraction in JTRAIN3? Why do you think there is such a big difference?
(ii) Using JTRAIN2, run a simple regression of
re78
on
train. What is the estimated effect of
participating in job training on real earnings?
(iii) Now add as controls to the regression in part (ii) the variables
re74,
re75,
educ,
age,
black, and
hisp. Does the estimated effect of job training on
re78
change much? How come? (Hint:
Remember that these are experimental data.)
(iv) Do the regressions in parts (ii) and (iii) using the data in JTRAIN3, reporting only the estimated coefficients on
train, along with their
t
statistics. What is the effect now of controlling for the extra factors, and why?
(v) Define
avgre
5 1re74
1
re752/2. Find the sample averages, standard deviations, and minimum
and maximum values in the two data sets. Are these data sets representative of the same
populations in 1978?
(vi) Almost 96% of men in the data set JTRAIN2 have
avgre
less than $10,000. Using only these
men, run the regression
re78
on
train,
re74,
re75,
educ,
age,
black,
hisp
and report the training estimate and its
t
statistic. Run the same regression for JTRAIN3, using only men with
avgre
# 10. For the subsample of low-income men, how do the estimated
training effects compare across the experimental and nonexperimental data sets?
(vii) Now use each data set to run the simple regression
re78
on
train, but only for men who were unemployed in 1974 and 1975. How do the training estimates compare now?
(viii) Using your findings from the previous regressions, discuss the potential importance of having comparable populations underlying comparisons of experimental and nonexperimental estimates.