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use cornwell.dta
*** Problem 1
* prbarr interpretation:
* yes, stastically significant with p-value of 0.000;
* yes, quantitavely relevant, a 1% increase in the probability of being
arrested decreases the crime rate by 0.73% on average, holding everything
else constant
* prbpris interpretation:
* no, not statistically significant with p-value of 0.601 (>> 0.05);
* quantitavely not very relevant (a 1% increase in probability of being
sentenced to prison leads to an on average INcrease in crime rate by
0.13%, ceteris paribus),
* and effect's direction counter-intuitive; but no worries due to
statistical insignificance
*** Problem 2
regress lcrmrte lprbarr lprbconv lprbpris lavgsen lpolpc lwcon lwtuc lwtrd
lwfir lwser lwmfg lwfed lwsta lwloc if year == 87, vce(robust)
test lwcon lwtuc lwtrd lwfir lwser lwmfg lwfed lwsta lwloc
*** Problem 3
* regress lpolpc lprbarr lprbconv lprbpris lavgsen lwcon lwtuc lwtrd lwfir
lwser lwmfg lwfed lwsta lwloc if year == 87, vce(robust)
*** Problem 4
* mix potentially a good instrument for prbarr, as there are more likely
to be police called to face-to-face crime,
* rather than non-face-to-face crime (like fraud or tax evasion), so a
higher value for mix should correlate positively with prbarr
*** Problem 5
*** Problem 6
* this reduced form regression of police per capita on tax per capita
(including control variables) ...
* ... shows a statistically significant influence of taxpc: for a 1%
increase in taxpc there is on average a 0.39% increase in polpc, ceteris
paribus, ...
* ... which argaubly is quantitatively relevant, ...
* ... but by the rule of thumb this is a rather weak instrument with an F
statistic of 7.74 < 10
* this is contradictory with the iv regression before, in which the
instrumented polpc gained significance
* R2 of 0.47 OK for instrument