Difference between revisions of "Hornbeck (2010)"
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<math>Y_{ct}-Y_{c(t-1)}= \alpha_{st} + \beta_{1t}W_{c}+\beta_{2t}W_{c}^{2}+\beta_{3t}W_{c}^{3}+\beta_{4t}W_{c}^{4}+ \epsilon_{ct}</math> | <math>Y_{ct}-Y_{c(t-1)}= \alpha_{st} + \beta_{1t}W_{c}+\beta_{2t}W_{c}^{2}+\beta_{3t}W_{c}^{3}+\beta_{4t}W_{c}^{4}+ \epsilon_{ct}</math> | ||
*the estimated <math>\beta</math> are allowed to vary in each decade and summarize how changes over each decade in county outcome Y vary by country woodland level W | *the estimated <math>\beta</math> are allowed to vary in each decade and summarize how changes over each decade in county outcome Y vary by country woodland level W | ||
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| + | * We are looking at low woodland areas vs high woodland areas. The sample is county & decade. We need the introduction of barbwire to be endogenous i.e. it can't be correlated with better crops in any way. | ||
=== What do the authors tests achieve?=== | === What do the authors tests achieve?=== | ||
Revision as of 00:27, 16 May 2012
Return to BPP Field Exam Papers 2012
Contents
- 1 Empirical Questions:
- 1.1 What is the author's topic and hypothesis?
- 1.2 How does the author test the hypothesis?
- 1.3 What do the authors tests achieve?
- 1.4 How could the tests be improved on? Strengths? Weaknesses?
- 1.5 What are some alternative empirical strategies
- 1.6 How does the author rule out alternative hypotheses?
Empirical Questions:
What is the author's topic and hypothesis?
This paper examines the impact on agricultural development from a decrease in the cost of protecting farmland. Barbed wire appears to have had a substantial impact on agriculture development in the US and in particular, this may reflect an important role for protecting land and securing farmers' full bundle of property rights.
Theoretical Framework: [math]\frac{\partial I}{\partial C_{p}}=\frac{\partial I}{\partial P} \cdot \frac{\partial P}{\partial C_{p}}[/math]
The effect on Investment from a change in cost of protection equals the change in Investment from a change in protection multiplied by the change in protection from a change in cost of protection.
Since [math]\frac{\partial P}{\partial C_{p}} \lt 0[/math] we know that an estimate of [math]\frac{\partial I}{\partial C_{p}}[/math] is informative about the sign of [math]\frac{\partial I}{\partial P}[/math]
So, we can think of [math]\frac{\partial I}{\partial C_{p}}[/math] as the "reduced form" where marginal cost of protection is an instrumental variable. Since we do not have data on protection levels, we can not estimate the "first stage" and recover [math]\frac{\partial I}{\partial P}[/math].
How does the author test the hypothesis?
The author's take a difference in difference approach where the main specification is:
[math]Y_{ct}-Y_{c(t-1)}= \alpha_{st} + \beta_{1t}W_{c}+\beta_{2t}W_{c}^{2}+\beta_{3t}W_{c}^{3}+\beta_{4t}W_{c}^{4}+ \epsilon_{ct}[/math]
- the estimated [math]\beta[/math] are allowed to vary in each decade and summarize how changes over each decade in county outcome Y vary by country woodland level W
- We are looking at low woodland areas vs high woodland areas. The sample is county & decade. We need the introduction of barbwire to be endogenous i.e. it can't be correlated with better crops in any way.
