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I'm aware that the data set is not available but i need explanation to the answer please. 1. Private schools, academic achievement, and instrumental variables

I'm aware that the data set is not available but i need explanation to the answer please.

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1. Private schools, academic achievement, and instrumental variables For this assignment, we will use the data set voucher posted on Canvas. This data was used in an inuential economics paper to estimate the effect of attending a private school on students' academic achievement (Rouse 1998). In 1990, the city of Milwaukee in the United States began providing vouchers for students to attend private schools. Public schools are free in the US. but private schools often charge large fees. In this exercise, we will consider how attending one of these private schools affected students' test scores using instrumental variables. The variable choiceym indicates the number of years that a student attended a private school. This is our treatment. The city used a lottery program to select students to receive a voucher to pay for the cost of private school attendance. The variable seiectjv's indicates the number ot'years that a student was selected by lottery to get a voucher. This variable will serve as our instrument. The data span l99l-l994, so each of these variables can take on numbers from zero to four. Our outcome of'interest is students' percentile score on a math test administered in 1994. This variable is called mace. a. We would like to estimate the relationship between the number of years a student attended the private school [choiceyr and their score on a standardized math test (mace). One possible estimating equation is the following: mncei = I30 + Bichoiceyrs + f; Howeven we have seen in class that we cannot obtain an unbiased or consistent estimate of 131 ifchoiceyrs is correlated with the error term. Why might Choiceyrs be correlated with the error term in this case? (This is a conceptual question; you do not need to use Stata to answer it,just think about reasons why attending a private school might be correlated with other factors that could affect math scores.) (3 points) b. Of the 990 students in the sample, how many were never awarded a voucher\"? How many had a voucher available for four years? How many students actually attended a choice school for four years? (Hint: Try using the tabulare command in Stata.) (3 points) c. Now let's consider whether selecryrs is a good instrument for choiceyrs. Run a regression of choiceyrs on selectyrs. Interpret the coefcient on set'ectyrs and say whether the sign of this relationship is what you expected. Which of the three conditions for selectyrs to be a good instrument are we testing with this regression? Does setectyrs appear to satisfy this condition? (4 points} (1. Estimate the equation in part (a) without using an instrumental variable. Interpret the coefcient on choir-curs. What do your results say about the relationship between private school attendance and math scores? {3 points)

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