1. In your textbook Example 6.8, SAT scores. Example 6.8 SAT Scores Each year, about 1.7 million American high school st

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1 In Your Textbook Example 6 8 Sat Scores Example 6 8 Sat Scores Each Year About 1 7 Million American High School St 1 (160.31 KiB) Viewed 87 times

(1) Explain in detail, what does β2, β3 and δ
measure respectively? (for example, in our drug test example that
we used in class, the coefficient in front of the treated group
dummy variable measures how the treated group patients’ health
conditions (before and after) are different from the controlled
group patients’ health conditions (before and after)). (1.5
points)
(Hint: be careful when you are explaining β3 and δ,
point out the differences between those two.)
(2) Suppose I want to add a country fixed effect in the model
specified above (6-3),

1 In Your Textbook Example 6 8 Sat Scores Example 6 8 Sat Scores Each Year About 1 7 Million American High School St 2 (12.59 KiB) Viewed 87 times

Then (i) explain the structure of country FEs (Hint: to
start with, you should describe how many new dummy variables are
added due to country FEs.)
(ii) Explain what country fixed effects control for (for
example, individual (or personal) fixed effects control for
characteristics that doesn’t change over time for the same
individual but contributes to our outcome variable.)

1 In Your Textbook Example 6 8 Sat Scores Example 6 8 Sat Scores Each Year About 1 7 Million American High School St 3 (65.26 KiB) Viewed 87 times

1. In your textbook Example 6.8, SAT scores. Example 6.8 SAT Scores Each year, about 1.7 million American high school students take the SAT test. Students who are not satisfied with their performance have the opportunity to retake the test. Some students take an SAT prep course, such as Kaplan or Princeton Review, before the second attempt in the hope that it will help them increase their scores. An econometric investigation might consider whether these courses are effective in increasing scores. The investigation might examine a sample of students who take the SAT test twice, with scores yio and yn. The time dummy variable 7, takes value 1, -0"before" and T = 1 "after." The treatment dummy variable is D = 1 for those students who take the prep course and 0 for those who do not. The applicable model would be (6-3), SAT Score: = B4 + B2 2ndTeste + Bs PrepCourse + 8 2ndTest: < PrepCourse + Bipo The estimate of 8 would, in principle, be the treatment, or prep course effect.

SAT Score = By + B2 2ndTeste + Bs PrepCourse; + 8 2ndTest: < PrepCourse + + Bit

(1) Explain in detail, what does B2, B3 and 8 measure respectively? (for example, in our drug test example that we used in class, the coefficient in front of the treated group dummy variable measures how the treated group patients' health conditions (before and after) are different from the controlled group patients' health conditions (before and after)). (1.5 points) (Hint: be careful when you are explaining B; and 8, point out the differences between those two.) (2) Suppose I want to add a country fixed effect in the model specified above (6-3), SAT Score 1 = Be + B2 2ndTeste + B: PrepCourse + 8 2ndTest: < PrepCourse + Bite Then (1) explain the structure of country FEs (Hint: to start with, you should describe how many new dummy variables are added due to country Fes.) (ii) Explain what country fixed effects control for (for example, individual (or personal) fixed effects control for characteristics that doesn't change over time for the same individual but contributes to our outcome variable.)