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7.24 Many cities in California have passed Inclusionary Zoning policies (also known as below-market hous. ing mandates) as an attempt to make housing more affordable. These policies require developers to sell some units below the market price on a percentage of the new homes built. For example, in a development of 10 new homes each with market value $850,000, the developer may have to sell 5 of the units at $180,000. Means and Stringham (2012), and exercise 7.13, examine the effects of such policies on hoose prices and number of housing units available using 1990 and 2000 census data on California cities. Use the data file means for the following exercises. a. Use LNPRICE and LNUNITS as dependent variables in difference-in-difference regressions, with explanatory variables D, the indicator variable for year 2000; IZLAW, and the interaction of D and IZLLA. Is the estimatc of the treatment effect statistically significant, and of the anticipated sign? b. To the regressions in (a) add the control variable LMEDHHINC. Interpret the estimate of the new variable, including its sign and significance. How does this addition affect the estimates of the treatment effect? c. To the regressions in (b) add the variables 100 (EDUCATTAIN), 100( PROPPOVERTY), and LPOP. Interpret the estimates of these new variables, including their signs and significance. How do these additions affect the estimates of the treatment effect? d. Consider the differences-in-differences regression for LNPRICE ln(PRICEis)=1+2IZLAWi+3Di+(IZLAWiDi)+CITYi+eit In this model, CITYi represents some unobservable characteristic of each city that stays constant over time. Write this model for the year 2000(D1=1). Write this model for the year 1990(Dt=0). Subtract the expression for 1990 from the expression for 2000 . The dependent variable is DLNPRICEi=[ln(PRICEi,2000)ln(PRICEi,2000)]%PRICEi/100 which is the decimal equivalent of the percentage change in price for city i. What parameters and variables remain on the right-hand side after the subtraction? ln Price =14.627+14.275+14.127+13.926+10.802+10.863+10.875 - (three Ineatest and least values for en(rice).) lnUnits =14.1064+14.078+13.060+7292+7.449+7.505 - (three Sreatest and lowest valuer for buevuits).) Variables: a; izlaw ; izlaw-d; izyear; augprice; lulprice); units; luunits, hhids; (u (hulds) ; Pop I Pop; deusity; medhhici Inedhhic; eclucattain ; Proppoverty; meanttt w; prop 65; denprice; illnuits dlmedhhic ideersity ideducattan ; dproppoverty; idmeanttw; dprop 65; dpop; d lupos ((29) total. ) d: either 0 or 1 izlaw: cither or 1

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