# 1 Problem Set I

MIT 14.32 J. Angrist (angrist@mit.edu)
Spring 2009 Paul S!rimp" (paul_s@mit.edu)
#u\$iao %uang (yhuang7@mit.edu)
&ue' T!( )eb 19
A. From Wooldridge: C.2, C.3, C., C.!, C.7, C."
1. %his pro\$lem as&s you to use 'tata or 'A' to (ondu(t a series o) sampling e*periments.
a. +ra, !-- random samples o) si.e / )rom a random num\$er generator )or a standard normal
distri\$ution. %hen in(rease the sample si.e to 32. Finally, in(rease the sample si.e to 12/. 0lot
histograms o) the sampling distri\$utions o) 1i) the sample mean and 1ii) the sample 2arian(e, )or ea(h
these three sample si.es. 3o, repeat your e*periments )or three samples dra,n )rom another parametri(
distri\$ution o) your (hoi(e 1e.g., a uni)orm distri\$ution). +is(uss the results o) your e*periments in light
o) the (entral limit theorem.
\$. 4our e*periments produ(e 5samples o) sample means.6 Compute the mean and 2arian(e o) the sample
means generated \$y ea(h e*periment and (ompare them to the mean and 2arian(e predi(ted \$y statisti(al
theory. +oes the 2arian(e o) the sample means 1i.e., the sampling 2arian(e) de(rease ,ith sample si.e at
the rate predi(ted \$y the theory7 +oes 3ormality matter )or this7
2. 4ou are as&ed to (ondu(t a so(ial e*periment to measure the e))e(ts o) a 8o\$ 'ear(h Assistan(e
program designed to help unemployed ,or&ers )ind 9o\$s. 4ou ,ill do this \$y randomly (hoosing n1
e*perimental su\$9e(ts and n2 (ontrol su\$9e(ts )rom a pool o) n1:n2;n unemployed ,or&ers ,ho ,ere
sele(ted at random )rom the population o) ne, <nemployment =nsuran(e (laimants in >assa(hussetts.
a. Find the (hoi(e o) proportion treated, p;n1?n, that minimi.es the sampling 2arian(e o) the di))eren(e in
employment rates \$et,een treatment and (ontrols. 1%reat n as a &no,n (onstant).
\$. 3o, assume that it (osts A dollars to (olle(t data on anyone in your e*periment and that the 9o\$ sear(h
assistan(e pro2ided to the e*perimental group (osts @ dollars. 4ou (an (hoose any sample si.e 1n) \$ut
you must spend no more than A dollars on the e*periment. Again, maintaining the assumption that there
is no treatment e))e(t, sol2e )or the 2alue o) p ,hi(h minimi.es the 2arian(e o) the treatment?(ontrol
(ontrast gi2en the e*perimenterBs \$udget (onstraint. =nterpret your result and (ompare to part 1a).
(. Why is it use)ul to do e*er(ises li&e 1a) and 1\$) ,hile assuming there is a(tually no treatment e))e(t7
1o2er)
1
3. %a\$le 3 in the Wood\$ury and A.C. 'piegelman, paper on the reading list reports the results o) t,o
so(ial e*periments e*amining the relationship \$et,een <nemployment =nsuran(e 1<=) and the length o)
time unemployed. =n the Employer Experiment, any <= re(ipient )inding employment )or at least
months re(ei2ed a 2ou(her ,orth D!-- to his or her employer. =n the Claimant Experiment, any <=
re(ipient )inding employment )or at least months re(ei2ed D!-- dire(tly.
a. For ea(h e*periment, test the hypothesis that \$onuses de(reased the proportion o) <= (laimants ,ho
e*hausted their \$ene)its. For the employer e*periment, (ompute the test statisti( under t,o s(enarios: 1i)
the e*periment has no e))e(tE 1ii) the e*periment has an e))e(t.
\$. For ea(h e*periment, pi(& a signi)i(an(e le2el and test the hypothesis that the e*periment redu(ed
,ee&s o) insured unemployment in the )irst spell using a oneFtailed and t,oFtailed test. Whi(h test seems
to ma&e more sense in this (ase7
2