Question

Suppose that Fairfield began a living wage that paid all landscapers in the city a wage above the current market wage.  Vacaville, a neighboring city, did not begin a living wage. Below are employment data for the year before and the year after the living wage went into effect in Fairfield:

City	Landscaper employment year before living wage in Fairfield	Landscaper employment year after living wage in Fairfield
Fairfield	315	354
Vacaville	278	331

a. Explain whether or not Fairfield creating a living wage is a natural experiment that can help to determine the impact of the living wage on the employment of landscapers.

b. Use difference in differences estimation to calculate the impact of the living wage on the percent change in the employment level in Fairfield. (Be sure to convert the employment growth figures into percentages before doing the difference-in-differences calculation)

Answer 1