Economics Question

Description

Assignment Instructions:

Assignment Instructions:

1. Download the Module 6_RD merger data_May 2024_rev1.dtaDownload Module 6_RD merger data_May 2024_rev1.dta

2. Transform Research and Development expenses and sales by logging the variables

3. Run a regression assessing the impact of a merger on research and development. In doing so use logged Research and Development expense as the dependent variable and merger as one of the independent variable. Other independent variables include logged sales, firmtype, firm 2, firm 3, and firm 4 to control for firm size, hightech and lifesci to control for industry, and i.year to control for macroeconomic effects. For this regression, use clustered standard errors (cluster by firm) to control for serial correlation.

4. Then, run a second regression using a difference and difference model to estimate the effect of mergers on the growth in R&D expenditures. To do this, use the same model as above but drop the merger variable and add the interaction variable, which was created by multiplying firmtype times period. The treatment in this case is a merger with a 1 used for the merged Period (1998 through 2008) and 0 for the 1989 through 1997. The firm type is a 1 for the firms that engaged in a merger and a 0 for the firms that did not engage in a larger merger.

5. Then, run 2 more separate regressions (regressions 3 and 4) for the challenged group (mergers challenged by the government) and the non-challenged group. Do this using the following commands,

For challenge group: if chal_group==1 | firmtype==0

For non-challenge group: if chal_group==0 | firmtype==0

6. Analyze your results. For the DID regressions, focus on the coefficient for the interactive variable.

Do the results differ between the first regression using the merger variable versus the difference and difference regressions? How do your result differ between the challenge and non-challenged groups? What are the implications behind these results.

You should have four regression tables (use word tables – outreg2 command). Analyze and compare results.

Also, be sure to include an introduction in which you state the objectives of the assignment, and describe the data, and the models. Also, provide a conclusion section. Use word tables (use outreg2 command in Stata).

Resources:

Resources:

• Module 6_RD merger data_May 2024_rev1-1.dta