*
* Example 20.2 from page 779
* Klein's Model I
*
cal 1920
open data table20-5.prn
*
* Several of the columns have had to be renamed because they use names which are
* either illegal or conflict with basic RATS variables. C* is just C, W' is GW,
* K-1 is KLAG, I is IN, and T is TAX.
*
data(format=prn,org=columns) 1920:1 1941:1
*
* Create needed variables: sum of private and govt wage, and the trend variable.
*
set totwage = w+gw
set trend = t
*
* OLS regressions
*
linreg c
# constant p totwage p{1}
linreg in
# constant p p{1} klag
linreg w
# constant x x{1} trend
*
* Reduced form regressions
* The results in the text appear to be slightly off
*
linreg p
# constant p{1} klag x{1} trend tax g gw
linreg totwage
# constant p{1} klag x{1} trend tax g gw
linreg x
# constant p{1} klag x{1} trend tax g gw
*
* 2SLS regressions.
* Note that you need only one INSTRUMENTS instruction for all three regressions,
* since they use the same instrument set. The results in the text appear to be
* slightly off. Also the government wage variable should be included in the list
* of instruments.
*
instruments constant p{1} klag x{1} trend tax g
*
linreg(instruments) c
# constant p totwage p{1}
linreg(instruments) in
# constant p p{1} klag
linreg(instruments) w
# constant x x{1} trend