Question

Suppose 15 states pass a law that limits trial lawyers' compensation. No such law passed in the other 35 states. Suppose that the value of all malpractice suits goes from an average of $2.4 billion to $2.8 billion in those 15 states and goes from $2.3 billion to $2.6 billion in the 35 states over the time in which the laws were passed. What is the difference-in-difference estimator of the effect of these laws

Answer 1

Answer: $0.1 billion

Step-by-step explanation:

Difference-in-difference estimator = Range in value of malpractice suits in states with laws - Range in value of malpractice suits in the other 35 states

= (2.8 - 2.4) - (2.6 - 2.3)

= 0.4 - 0.3

= $0.1 billion