*Econ 241B
*HW 2 Solutions
*Prepared by Valerie Bostwick
*Last edited 1.26.2015
 
*Set current directory
cd "C:\Users\vkbostwick\Dropbox\Teaching_Grad_Metrics930"
 
*Make sure no log file is currently open
capture log close
*Open a new log file
log using "example_logfile.log", replace 
 
*read in data
use "Exercise 2.dta", clear
  
*Drop observations where pubwage==0
drop if pubwage==0



***Replicate Column (1) of Table 3***
*e1 = beta0 + beta1*w1 + u
*estimate regression for column (1)
reg e1 w1
 
 

***Replicate Column (2) of Table 3***
*e1 = beta0 + beta1*w1 + beta2(w1-w2) + u
*create relative wage variable
gen rel_wage=w1-w2
*estimate regression for column (2)
reg e1 w1 rel_wage

*The t-statistic for rel_wage=0 is 0.23 with a p-value of 0.820
*We fail to reject the null



***Replicate Column (3) of Table 3*** 
*e1 = beta0 + beta1*w1 + beta2[(w1-w2)*(w1<w2)] + u
*create indicator*rel_wage variable
gen ind_relwage=rel_wage*(w1<w2)
*estimate regression for column (3)
reg e1 w1 ind_relwage
 
*The t-statistic for ind_relwage=0 is -0.21 with a p-value of 0.835
*We fail to reject the null

 log close
 clear