*
*  Example 9.5 and 9.6
*  J. Wooldridge, Econometrics of Cross Section and Panel Data
*
*  Note: The sample data files include all required data transformations.
*        However, in many cases we show how these data transformations would
*        be created in RATS from the basic data, as this is something you will
*        need to know how to do in practice.
*
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 / resids
# constant lwage educ age kidslt6 kidsge6 nwifeinc
*
* Test the one overidentifying restriction. (Again, you can look at the
* J-statistic in the previous output to get almost the identical test value).
*
linreg(noprint) resids
# constant constant educ age kidslt6 kidsge6 nwifeinc exper expersq
cdf(title="Test of Overidentification") chisqr %trsq 1
*
* Estimate the reduced form for hours to see whether the instruments excluded
* from the wage equation will work.
*
linreg hours
# constant educ age kidslt6 kidsge6 nwifeinc exper expersq
exclude
# age kidslt6 kidsge6 nwifeinc
*
* Estimate the wage equation by 2SLS.
*
linreg(instruments) lwage
# constant hours educ exper expersq
*
* Check the reduced form for log(wage) and see if the instruments excluded from a
* renormalized labor demand function work.
*
linreg lwage
# constant educ age kidslt6 kidsge6 nwifeinc exper expersq
exclude
# age kidslt6 kidsge6 nwifeinc
*
* Estimate the labor demand function by 2SLS - (results will be suspect).
*
linreg(instruments) hours
# constant lwage educ exper expersq
*
* Estimate the model by 3SLS (from problem 9.9)
*
* Define the two equations to be estimated
*
equation hourseq hours
# constant lwage educ age kidslt6 kidsge6 nwifeinc
equation wageeq lwage
# constant hours educ exper expersq
sur(instruments) 2
# hourseq
# wageeq
*
* Example 9.6
* Add log(wage)**2 to the supply equation and add some squared terms to the list
* of instruments.
*
set lwagesq    = lwage**2
set agesq      = age**2
set educsq     = educ**2
set nwifeincsq = nwifeinc**2
*
instruments constant educ age kidslt6 kidsge6 nwifeinc exper expersq agesq educsq nwifeincsq
linreg(instruments) hours / resids
# constant lwage lwagesq educ age kidslt6 kidsge6 nwifeinc
*
* Do a test of overidentifying restrictions.
*
linreg(noprint) resids
# constant educ age kidslt6 kidsge6 nwifeinc exper expersq agesq educsq nwifeincsq
cdf(title="Test of Overidentication") chisqr %trsq 3