sliderule_dsi_inferential_statistics_exercise_2.ipynb

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    "# Examining Racial Discrimination in the US Job Market\n",
    "\n",
    "### Background\n",
    "Racial discrimination continues to be pervasive in cultures throughout the world. Researchers examined the level of racial discrimination in the United States labor market by randomly assigning identical résumés to black-sounding or white-sounding names and observing the impact on requests for interviews from employers.\n",
    "\n",
    "### Data\n",
    "In the dataset provided, each row represents a resume. The 'race' column has two values, 'b' and 'w', indicating black-sounding and white-sounding. The column 'call' has two values, 1 and 0, indicating whether the resume received a call from employers or not.\n",
    "\n",
    "Note that the 'b' and 'w' values in race are assigned randomly to the resumes when presented to the employer."
   ]
  },
  {
   "cell_type": "markdown",
   "metadata": {},
   "source": [
    "### Exercises\n",
    "You will perform a statistical analysis to establish whether race has a significant impact on the rate of callbacks for resumes.\n",
    "\n",
    "Answer the following questions **in this notebook below and submit to your Github account**. \n",
    "\n",
    "   1. What test is appropriate for this problem? Does CLT apply?\n",
    "   2. What are the null and alternate hypotheses?\n",
    "   3. Compute margin of error, confidence interval, and p-value.\n",
    "   4. Write a story describing the statistical significance in the context or the original problem.\n",
    "   5. Does your analysis mean that race/name is the most important factor in callback success? Why or why not? If not, how would you amend your analysis?\n",
    "\n",
    "You can include written notes in notebook cells using Markdown: \n",
    "   - In the control panel at the top, choose Cell > Cell Type > Markdown"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 1,
   "metadata": {
    "collapsed": true
   },
   "outputs": [],
   "source": [
    "import pandas as pd\n",
    "import numpy as np\n",
    "from scipy import stats"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 2,
   "metadata": {
    "collapsed": false
   },
   "outputs": [],
   "source": [
    "data = pd.io.stata.read_stata('data/us_job_market_discrimination.dta')"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 3,
   "metadata": {
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   "outputs": [
    {
     "data": {
      "text/plain": [
       "157.0"
      ]
     },
     "execution_count": 3,
     "metadata": {},
     "output_type": "execute_result"
    }
   ],
   "source": [
    "# number of callbacks for black-sounding names\n",
    "sum(data[data.race=='b'].call)"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 4,
   "metadata": {
    "collapsed": false
   },
   "outputs": [
    {
     "data": {
      "text/html": [
       "<div>\n",
       "<table border=\"1\" class=\"dataframe\">\n",
       "  <thead>\n",
       "    <tr style=\"text-align: right;\">\n",
       "      <th></th>\n",
       "      <th>id</th>\n",
       "      <th>ad</th>\n",
       "      <th>education</th>\n",
       "      <th>ofjobs</th>\n",
       "      <th>yearsexp</th>\n",
       "      <th>honors</th>\n",
       "      <th>volunteer</th>\n",
       "      <th>military</th>\n",
       "      <th>empholes</th>\n",
       "      <th>occupspecific</th>\n",
       "      <th>...</th>\n",
       "      <th>compreq</th>\n",
       "      <th>orgreq</th>\n",
       "      <th>manuf</th>\n",
       "      <th>transcom</th>\n",
       "      <th>bankreal</th>\n",
       "      <th>trade</th>\n",
       "      <th>busservice</th>\n",
       "      <th>othservice</th>\n",
       "      <th>missind</th>\n",
       "      <th>ownership</th>\n",
       "    </tr>\n",
       "  </thead>\n",
       "  <tbody>\n",
       "    <tr>\n",
       "      <th>0</th>\n",
       "      <td>b</td>\n",
       "      <td>1</td>\n",
       "      <td>4</td>\n",
       "      <td>2</td>\n",
       "      <td>6</td>\n",
       "      <td>0</td>\n",
       "      <td>0</td>\n",
       "      <td>0</td>\n",
       "      <td>1</td>\n",
       "      <td>17</td>\n",
       "      <td>...</td>\n",
       "      <td>1.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>1.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td></td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>1</th>\n",
       "      <td>b</td>\n",
       "      <td>1</td>\n",
       "      <td>3</td>\n",
       "      <td>3</td>\n",
       "      <td>6</td>\n",
       "      <td>0</td>\n",
       "      <td>1</td>\n",
       "      <td>1</td>\n",
       "      <td>0</td>\n",
       "      <td>316</td>\n",
       "      <td>...</td>\n",
       "      <td>1.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>1.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td></td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2</th>\n",
       "      <td>b</td>\n",
       "      <td>1</td>\n",
       "      <td>4</td>\n",
       "      <td>1</td>\n",
       "      <td>6</td>\n",
       "      <td>0</td>\n",
       "      <td>0</td>\n",
       "      <td>0</td>\n",
       "      <td>0</td>\n",
       "      <td>19</td>\n",
       "      <td>...</td>\n",
       "      <td>1.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>1.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td></td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>3</th>\n",
       "      <td>b</td>\n",
       "      <td>1</td>\n",
       "      <td>3</td>\n",
       "      <td>4</td>\n",
       "      <td>6</td>\n",
       "      <td>0</td>\n",
       "      <td>1</td>\n",
       "      <td>0</td>\n",
       "      <td>1</td>\n",
       "      <td>313</td>\n",
       "      <td>...</td>\n",
       "      <td>1.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>1.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td></td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>4</th>\n",
       "      <td>b</td>\n",
       "      <td>1</td>\n",
       "      <td>3</td>\n",
       "      <td>3</td>\n",
       "      <td>22</td>\n",
       "      <td>0</td>\n",
       "      <td>0</td>\n",
       "      <td>0</td>\n",
       "      <td>0</td>\n",
       "      <td>313</td>\n",
       "      <td>...</td>\n",
       "      <td>1.0</td>\n",
       "      <td>1.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>1.0</td>\n",
       "      <td>0.0</td>\n",
       "      <td>Nonprofit</td>\n",
       "    </tr>\n",
       "  </tbody>\n",
       "</table>\n",
       "<p>5 rows × 65 columns</p>\n",
       "</div>"
      ],
      "text/plain": [
       "  id ad  education  ofjobs  yearsexp  honors  volunteer  military  empholes  \\\n",
       "0  b  1          4       2         6       0          0         0         1   \n",
       "1  b  1          3       3         6       0          1         1         0   \n",
       "2  b  1          4       1         6       0          0         0         0   \n",
       "3  b  1          3       4         6       0          1         0         1   \n",
       "4  b  1          3       3        22       0          0         0         0   \n",
       "\n",
       "   occupspecific    ...      compreq  orgreq  manuf  transcom  bankreal trade  \\\n",
       "0             17    ...          1.0     0.0    1.0       0.0       0.0   0.0   \n",
       "1            316    ...          1.0     0.0    1.0       0.0       0.0   0.0   \n",
       "2             19    ...          1.0     0.0    1.0       0.0       0.0   0.0   \n",
       "3            313    ...          1.0     0.0    1.0       0.0       0.0   0.0   \n",
       "4            313    ...          1.0     1.0    0.0       0.0       0.0   0.0   \n",
       "\n",
       "  busservice othservice  missind  ownership  \n",
       "0        0.0        0.0      0.0             \n",
       "1        0.0        0.0      0.0             \n",
       "2        0.0        0.0      0.0             \n",
       "3        0.0        0.0      0.0             \n",
       "4        0.0        1.0      0.0  Nonprofit  \n",
       "\n",
       "[5 rows x 65 columns]"
      ]
     },
     "execution_count": 4,
     "metadata": {},
     "output_type": "execute_result"
    }
   ],
   "source": [
    "data.head()"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 7,
   "metadata": {
    "collapsed": false
   },
   "outputs": [
    {
     "data": {
      "text/plain": [
       "4870"
      ]
     },
     "execution_count": 7,
     "metadata": {},
     "output_type": "execute_result"
    }
   ],
   "source": [
    "data.id.count()"
   ]
  },
  {
   "cell_type": "markdown",
   "metadata": {},
   "source": [
    "### Question 1"
   ]
  },
  {
   "cell_type": "markdown",
   "metadata": {},
   "source": [
    "We actually have a binomial distribution here given candidates either get a callback (success) or do not (failure).  However, for very large sample sizes, a binomial distribution can be approximated by a normal distribution per the Central Limit Theorem.  This is the case with this dataset, which includes 4,870 points.  We also know the standard deviation of the population from which these samples (black and white) were drawn.  Therefore, we can apply the z-test to determine if the mean rate of callbacks varies between black and white."
   ]
  },
  {
   "cell_type": "markdown",
   "metadata": {},
   "source": [
    "### Question 2"
   ]
  },
  {
   "cell_type": "markdown",
   "metadata": {},
   "source": [
    "The null hypothesis is that there is no difference in the mean callback rates between black-sounding and white-sounding names, and the mean difference calculated above is purely due to random chance.  The alternate hypothesis is that there **is** a difference."
   ]
  },
  {
   "cell_type": "markdown",
   "metadata": {},
   "source": [
    "### Question 3"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 29,
   "metadata": {
    "collapsed": false
   },
   "outputs": [
    {
     "name": "stdout",
     "output_type": "stream",
     "text": [
      "Difference in mean callback rate between black and white: -0.03203285485506058\n"
     ]
    }
   ],
   "source": [
    "black = data[data.race=='b'].call\n",
    "white = data[data.race=='w'].call\n",
    "meanDiff = black.mean() - white.mean()\n",
    "print('Difference in mean callback rate between black and white:', meanDiff)"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 26,
   "metadata": {
    "collapsed": false
   },
   "outputs": [
    {
     "data": {
      "text/plain": [
       "0.007784906919813793"
      ]
     },
     "execution_count": 26,
     "metadata": {},
     "output_type": "execute_result"
    }
   ],
   "source": [
    "import math\n",
    "\n",
    "#Find the standard error between the black and white callback data\n",
    "SE = math.sqrt(black.std()**2/black.count() + white.std()**2/white.count())\n",
    "SE"
   ]
  },
  {
   "cell_type": "markdown",
   "metadata": {},
   "source": [
    "We can now use the z-score to determine if a mean difference of -0.03 is greater than our 5% significance level.  We know that for a two-tailed test (since we only care if the means are different, not more or less than the other), the cut-off z-scores are -1.96 and 1.96.  Therefore, the range we're interested in is the standard error multiplied by these z-scores."
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 31,
   "metadata": {
    "collapsed": false
   },
   "outputs": [
    {
     "name": "stdout",
     "output_type": "stream",
     "text": [
      "Margin of error = 0.015258417562835034\n",
      "Range for 95% confidence interval: (-0.04729127241789561, -0.016774437292225546)\n"
     ]
    }
   ],
   "source": [
    "print('Margin of error =', 1.96 * SE)\n",
    "print('Range for 95% confidence interval:', (-1.96 * SE + meanDiff, 1.96 * SE + meanDiff))"
   ]
  },
  {
   "cell_type": "markdown",
   "metadata": {},
   "source": [
    "To find the p-value, we first find the z-score for a difference in means of 0."
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 32,
   "metadata": {
    "collapsed": false
   },
   "outputs": [
    {
     "name": "stdout",
     "output_type": "stream",
     "text": [
      "Critical z-score =  -4.114738324427747\n"
     ]
    }
   ],
   "source": [
    "zScore = meanDiff / SE\n",
    "print('Critical z-score = ', zScore)"
   ]
  },
  {
   "cell_type": "markdown",
   "metadata": {},
   "source": [
    "This z-score results in such a small p-value (even when doubled to account for a two-tailed test) that we can firmly reject the null hypothesis that there is no difference in mean callback rate between white-sounding and black-sounding names on a resume."
   ]
  },
  {
   "cell_type": "markdown",
   "metadata": {},
   "source": [
    "It is difficult to say at this stage whether or not race is the most important factor in the job applicaton process.  We have only proven that it is significant.  Further analysis could be performed on the other factors in the dataset (year of experience, education, etc.) to determine if the effect is as pronounced with the other variables."
   ]
  },
  {
   "cell_type": "code",
   "execution_count": null,
   "metadata": {
    "collapsed": true
   },
   "outputs": [],
   "source": []
  }
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