During the early 1980s the states of Kentucky and Michigan changed their worker’s compensation laws for workers who suffer a temporary total disability and consequently have time away from work for which they need to be compensated. The main effect of the changes was to raise the maximum available benefit. Since benefits are proportional to wages, this had no effect on the compensation available to low income earners, but for high income earners, who had previously been constrained by the maximum available benefit, it raised the value of worker’s compensation benefits by approximately 55%.
This dataset contains data on the number of weeks that temporarily totally disabled workers are away from work (durat) for a sample of high-income workers from each state. Part of the sample was taken before the changes, and part was taken afterwards. The dummy variable (afchnge) takes a value of 1 if the observation is from after the changes and a value of 0 if it is from before. The dataset also contains several dummy variables that may be relevant for the length of time that a worker claims benefits.
Your assignment is to use econometric techniques that you have learned in ECON7035/8040 to test the null hypothesis that the change in the maximum benefit did not affect the length of time that the average high-income worker spends away from work due to events that cause temporary total disability. If you reject the null hypothesis then you should provide an estimate of a measure of the sensitivity of the time spent on compensation to changes in the maximum benefit. You should also quantify the uncertainty of your estimator. You must submit two files for assessment – a written report that has been saved in the PDF format, and a Gretl session file. The requirements for these files are explained in detail below.
Your written report should should provide a clear statement of your test results and estimates, a clear description of the econometric techniques and results that you used to generate your results, and a clear, convincing justification of the techniques that you used. Your main objective is to convince the marker that your results are credible (or at least as credible as is possible given the data provided). If you think that there are any weaknesses in your results or approach, then you should state them clearly and, when appropriate, suggest how they might be addressed in ******deal ******d. Your report should cons****** of fewer than 1500 words (possibly much fewer), excluding tables and figures. It should not include appendices. Instead, any tables, figures, etc that you think are relevant should be included in the text of the report at the point at which they are discussed. You should proofread your work and ensure that the spelling and grammar are correct. You should use a font type and size that are easy to read (e.g. Times New Roman 12). Any equations should be typeset using your software package’s equation editor (or equivalent). Tables, figures, etc should have titles and appropriate labels. Your report should be saved as a PDF file1. Microsoft Word is able to save files in the PDF format (but you should check the output carefully), as are OpenOffice, LibreOffice and many other document preparation software packages. LaTeX is a good option for those who know how to use it. You should check that you are able to cr******e a PDF file with your software before you start typing your report. If you need help cr******ing PDF files, post a request in the online discussion forums. Marks will be deducted for poor presentation and, in extreme cases where the marker is unable easily to understand parts of your assignment, part (or all) or your assignment may attract no marks.
In addition to submitting your written report, you must also submit a Gretl session file containing your computational work. All models that you have estimated, tests that you have conducted, plots that you have cr******ed, etc, should be saved as icons in Gretl, labelled in such a way that the marker may easily find everything that was generated using Gretl and is mentioned in your written report. The Gretl session file that you submit will not be separately marked, but may be used by the marker to understand your written report better. Students who do not submit a Gretl session file, or submit a file which does not include all of the computational work reported, are at risk of losing marks if the marker has difficulty forming a judgement about the quality of model used, the econometric techniques used, or the rationale for the techniques and model, and wishes to investigate further. Having said this, there is no guarantee that the marker will look at your Gretl session file, so everything that you want to tell the marker about your work should be included in your written report. Optionally, you may also submit other files (e.g. spreadsheet files) if you think there is a possibility that the marker might find them useful.
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