Economic Impact Studies: Practical Tips & Examples - Michael Moore

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Economic Impact Studies: Practical Tips & Examples - Michael Moore

  1. 1. Quasi-Experiments in Empirical Economics: An Application to Extreme Levels of Lake Michigan<br />Michael R. Moore<br />School of Natural Resources and Environment<br />University of Michigan<br />
  2. 2. Outline<br />Quasi-experiments in empirical economics<br />Application to extremely low levels of Lake Michigan <br />Research question: did the extremely low levels <br />of Lake Michigan in 2000-07 cause economic <br />impacts in Lake Michigan coastal counties?<br />
  3. 3. Quasi-experiment<br />Experiment<br />Scientific method of control group, treatment group, and experimental treatment<br />What is the effect of the treatment on the treatment group?<br />Quasi-experiment<br />Research design of groups and a treatment not arranged in advance<br />A by-product of public policy, public program, or nature<br />Desirable feature: establishes causal evidence, not simply association evidence<br />
  4. 4. Average Treatment Effect (ATE): what is the effect of the<br />treatment on an outcome variable in the treated counties?<br />ATE = [(Average 4 – Average 3) – (Average 2 – Average 1)]<br /> (approximated ATE)<br />
  5. 5. Low lake levels(Michigan Sea Grant Archives)<br />
  6. 6. Policy dialogues on lake levels (IJC)<br />Lake Ontario – St. Lawrence River Study (2006)<br />Lake Ontario is a regulated lake<br />“Lake levels are too even; not enough fluctuation”<br />Upper Great Lakes Study (2012)<br />Lake Superior is regulated; Lakes Michigan-Huron and Erie are unregulated<br />Joint management of these lake levels<br />“levels of Lake Michigan-Huron are too extreme”<br />
  7. 7. Great Lakes lake levels, 1960-2007<br />Michigan-Huron<br />Erie<br />Superior<br />Ontario<br />
  8. 8. Extremely low lake levels as a quasi experiment<br />Control group:<br />Counties adjacent to <br />Lakes Ontario and Erie <br />Treatment group:<br /> Counties adjacent to Lake Michigan-Huron<br />Treatment: <br /> 2000-07 episode of extremely low levels<br />
  9. 9. Data: NAICS Sector 72, Accommodation and Food Services<br />County-level data for 1990-2007<br />Outcome variables: establishments, employment, and wage rate in Sector 72<br />We expect the Average Treatment Effects to be negative<br />
  10. 10. Results<br />Approximated Average Treatment Effects:<br />Establishments (number of establishments)<br /> ATE: [(239 - 213) – (590 - 567)] = 3<br />Employment (number of employees)<br /> ATE: [(4240 - 3704) – (10481 - 9554)] = -391<br />Wage Rate (cents per hour)<br /> ATE: [(873 - 648) – (860 - 661)] = 26<br />
  11. 11. Summary and Conclusions<br />
  12. 12. Thank you!<br />

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