ECO 440/640 — Problem Set 7

(Regression discontinuity)

Due 11:59pm April 28, 2017

Your task is to determine whether spending time with cats makes people smile more.


Get the cat happiness data (.RData, .csv). These data are fabricated, but they represent the prejudices of your instructor.

There are many places without animal shelters nearby, so we can imagine that someone who opens a cat shelter in one location might do so simply because there are few shelters there. This decision would then lower the cost to the townsfolk of interacting with cats. Thus we would imagine that the people living near the shelter would subsequently spend more of their time around cats.

The cat happiness data contains the following information:

“People in the immediate neighborhood” includes only people who had lived in the neighborhood before the shelter opened.

Answering the question

  1. Explain why a regression discontinuity design might be useful in this case. What must be true for the RD estimates to be unbiased estimates of the causal effect of cats on smiling? Identify a potential source of bias.
  2. Graph the relevant data and comment on whether there is evidence for the hypothesis that cats make people smile.
  3. Write out the models you will estimate and explain why you are using those models. How specifically will you identify the effect of time with cats on smiles rather than just the effect of being near a shelter (this involves instrumental variables estimation)?
  4. Estimate the models, report the results, and test the hypothesis.
  5. Perform a set of “non-parametric” estimates. Show the effect of the bandwidth size on the estimates.