Your Textbook Mentions Use of a Quasi-Experiment to Study the Effects

Essay

Your textbook mentions use of a quasi-experiment to study the effects of minimum wages on employment using data from fast food restaurants. In 1992, there was an increase in the (state) minimum wage in one U.S. state (New Jersey) but not in neighboring location (Eastern Pennsylvania). To calculate the $\widehat { \beta } _ { 1 } ^ { \text {diffs-in-diffs } }$ you need the change in the treatment group and the change in the control group. To do this, the study provides you with the following information

$\begin{array}{|l|c|c|} \hline& \text { PA } & \text { NJ } \\ \hline \begin{array}{l}\text { FTE Employment } \\\text { before }\end{array} & 23.33 & 20.44 \\\hline \begin{array}{l}\text { FTE Employment } \\\text { after }\end{array} & 21.17 & 21.03 \\\hline\end{array}$

Where $F T E$ is "full time equivalent" and the numbers are average employment per restaurant. W
(a) Calculate the change in the treatment group, the change in the control group, and finally $\widehat { \beta } _ { 1 } ^ { d i f f - i n - d i f f s }$ . Since minimum wages represent a price floor, did you expect $\widehat { \beta } _ { 1 } ^ { d i f f s - i n - d i f f s }$ to be positive or negative?