*
* CHAPTER 12
* Page 431
*
open data ch12_cig.xls
data(format=xls,org=columns) 1 96 year cpi pop packpc income tax avgprs taxs
*
* Deflate the avg price, cigarette specific tax and all taxes
*
set ravgprs = avgprs/cpi
set rtax    = tax/cpi
set rtaxs   = taxs/cpi
*
* This is the sales tax only
*
set rtaxso  = rtaxs-rtax
*
* First stage regression
*
set lravgprs = log(ravgprs)
set lpackpc  = log(packpc)
*
* Equation 12.9
linreg(smpl=(year==1995)) lravgprs
# constant rtaxso
*
* Get fitted values
*
prj phat
*
* Second stage regression
*
* Equation 12.10
linreg(smpl=(year==1995)) lpackpc
# constant phat
*
* Direct use of 2SLS. Start by using the INSTRUMENTS instruction to set the
* instrument list (here constant and rtaxso).
*
instruments constant rtaxso
*
* Then a LINREG with the INST option
*
* Equation 12.11
linreg(inst,smpl=(year==1995),robust) lpackpc
# constant lravgprs
*
* Section 12.2 (pg 432)
* For this section, we need the real per capita income
*
set perinc  = income/(pop*cpi)
set lperinc = log(perinc)
*
* Include all exogenous variables in the instruments instruction.
*
* Equation 12.15
instruments constant rtaxso lperinc
linreg(inst,smpl=(year==1995),robust) lpackpc
# constant lravgprs lperinc
*
* For doing 12.16, we also need the cigarette-specific taxes added to the
* instrument set
*
* Equation 12.16
instruments constant rtaxso lperinc rtax
linreg(inst,smpl=(year==1995),robust) lpackpc
# constant lravgprs lperinc
*
* Section 12.4 (pg 445)
* We need to generate the differences of the variables from the value in the same
* state 10 years earlier. In this data set, that will be "lag" 48.
*
set ltpackpc = log(packpc/packpc{48})
set ltavgprs = log(ravgprs/ravgprs{48})
set ltperinc = log(perinc/perinc{48})
set dtrtaxs  = rtaxs-rtaxs{48}
set dtrtax   = rtax-rtax{48}
set dtrtaxso = rtaxso-rtaxso{48}
*
instruments constant ltperinc dtrtaxso
linreg(inst,robust) ltpackpc
# ltavgprs ltperinc constant
*
instruments constant ltperinc dtrtax
linreg(inst,robust) ltpackpc
# ltavgprs ltperinc constant
*
instruments constant ltperinc dtrtaxso dtrtax
linreg(inst,robust) ltpackpc
# ltavgprs ltperinc constant