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Topics in Labor Economics - Problem Set 2

March 2024

This problem set offers you great practice and feedback for the final assessment. Before you start working on the questions, a few general remarks:

•  The general rules for academic malpractice apply! If you need a re-fresher, look  here https://online.manchester.ac.uk/webapps/blackboard/content/listContentEditable.jsp?content_id=_11454599_1&course_id=_460331

•  Especially: You have to formulate your own answers! This implies three things:

1.  You must not copy-paste the answer from other sources (e.g., the lecture notes, other papers,...)  but formulate your own answer (this includes you must not write almost an identical sentence and just exchange 1,2 words...).

2.  While you can discuss the questions with your classmates you each have to write and submit individual answers!

3.  Using software that writes answers for you or external help (someone writ- ing the paper for you) is obviously prohibited.

•  Make sure that your answer is comprehensible. This includes checking spelling, grammar, punctuation, and such. If I cannot understand your response, I cannot give you points on it.

–  If you are worried about this, there are resources available to help you with this: https://www.ucae.manchester.ac.uk/

–  Of course, you can use programs that check your spelling, e.g. the in-built function in Word or Grammarly.

•  Answer your questions with full sentences (essay style).  Bullet points are not allowed.

•  Allocate your time wisely. If a question gives more points, it means that I expect a more thorough answer.

•  Thorough ≠ longer. Try being concise! Most questions do not require a half-a- page answer (check the marks again!)

•  You have a (strict)1000 word limit.  Copying questions from this sheet to your answer sheet counts towards this limit.

1    Ost, Pan, and Webber, 2018 (27 Marks)

Read the paper The Returns to College Persistence for Marginal Students: Regression Discontinuity Evidence from University Dismissal Policies by Ost, Pan, and Webber. Carefully answer the following questions.

1.  (1 Mark) Summarize the research question.

2.  (1 Mark) Name the type of model the authors are estimating.

3.  (3 Marks) Explain how the authors use the Academic Dismissal Policies to iden- tify the causal effect of interest.

4.  (6 Marks) Discuss three key assumptions for their empirical research design (as discussed in the paper and the lecture).

5.  (4 Marks) Explain: why are the authors estimating a "donut-RDD" model?

6.  Briefly summarize their main findings on how falling below the GPA threshold:

(a)  (1 Mark) impacts weekly earnings.

(b)  (1 Mark) impacts the probability of earning a degree from their initial col- lege.

7.  (7 Marks) Discuss why the authors expect the short-run and medium-run impact of enrollment on earnings to go in opposite directions. Relate your answer to the theory covered in class.

8.  (3 Marks) In response to this study, a politician suggests reducing the GPA cutoff for dismissal to increase the earnings of even low-achieving students.  Do you think this policy reform will have the intended effect?