Question

Please I need answer for This question at the moment and it is very important and I need solution for this issue with all the details .please you can write the answer typing and not write by hand, so that I can read and understand your answer clearly.I need step by step solution to the following this question asap .I have limited time so please do it quickly with detailed explanation.thanks in advance/Ha

Q. Assume you have a dataset available that includes information on who is playing in a lottery, who wins a lottery and information on how much these individuals work over several time periods (both before and after the lottery).

a) How would you test whether winning the lottery affects labour supply and hence whether the predictions, hold in the real world? Describe the method you would use and how you would use it.

b) Would you use the full sample of individuals in the data set or only the individuals that in the first place play lotteries?

Answer 1

(A)-All the people who are playing lottery, some of them will win and some them will lose the lottery. We create a dummy variable for the time period in which a person wins lottery.

Person who wins will have value 1, and the one who does not win will have value 0. Person who does not wins will have all zeros.

Therefore, we are having two groups of data. Now, we regress labour hours on this dummy and cheak if the coefficient is negative , reflecting that after winning people reduce the labour hours.

(B)-We will only use the individuals that in the first place lotteries, it is because if we include those who do not plays well, this will introduce a lot of other unobservable variables like risk profile of the people which will be different for different groups. This will lead to endogeneity and regressions will fail to tell us anything.

THANKS YOU.

Please ask queries,if any.