*
* INSTRUMENT.RPF
* RATS Version 8, User's Guide, Example 2.3
* Based on example 9.5 from Wooldridge, Econometrics of Cross Section and
* Panel Data.
*
open data mroz.raw
data(format=free,org=columns) 1 428 inlf hours kidslt6 kidsge6 $
 age educ wage repwage hushrs husage huseduc huswage faminc mtr $
 motheduc fatheduc unem city exper nwifeinc lwage expersq
*
set lwage = log(wage)
set expersq = exper**2
*
*  Estimate the labor supply function by OLS
*
linreg hours
# constant lwage educ age kidslt6 kidsge6 nwifeinc
*
*  Now by 2SLS
*
instruments constant educ age kidslt6 kidsge6 nwifeinc exper expersq
linreg(instruments) hours
# constant lwage educ age kidslt6 kidsge6 nwifeinc
*
* Check the reduced form for log(wage) and see if the instruments
* excluded from the labor demand function (exper and expersq) work.
*
linreg lwage
# constant educ age kidslt6 kidsge6 nwifeinc exper expersq
*
* Estimate the wage equation by 2SLS
*
linreg(instruments) lwage
# constant hours educ exper expersq
*
* Estimate the reduced form for hours.
*
linreg hours
# constant educ age kidslt6 kidsge6 nwifeinc exper expersq