* ass6w07q4.do
clear
capture log close 
log using ass6w07q4.txt, text replace

** STATA Program by A. Colin Cameron for 240A 

********** OVERVIEW OF ASS6W07Q4.DO **********

* IV example

* To run this Stata program you need data and dictionary files
*    DATA66.dat    ASCII data set
*    DATA66.dct    Stata dictionary that labels variables

********** SETUP

set more off
version 8.0
set memory 20m
set linesize 150   /* Permits long inputline commands with delimit */
set scheme s1mono

********** ORIGINAL DATA SOURCE

* Program based on Kling Analys66.d0  September 2003
* written for Jeffrey R. Kling (2001) "Interpreting Instrumental Variables Estimates
* of the Return to Schooling", Journal of Business and Economic Statistics,
* July 2001, 19 (3), pp.358-364.
* in turn based on 
* David Card (1995), "Using Geographic Variation in College Proximity to
*   Estimate the Returns to Schooling", in 
*   Aspects of Labor Market Behavior: Essays in Honor of John Vanderkamp, 
*   eds. L.N. Christofides et al., Toronto: University of Toronto Press, pp.201-221.
 
********** READ IN DATA 

infile using DATA66.dct, using(DATA66.dat)
* save DATA66, replace

********** SELECT SAMPLE AND SUMMARIZE

sum wage76 grade76 col4

* RETAIN cases for the analysis
* Here drop if missing wages or missing schooling
keep if wage76!=. & grade76!=. & col4!=.
sum wage76 grade76 col4

* QUESTION 4 IV 

* OLS 
reg wage76 grade76
* First stage regression
reg grade76 col4
* IV regression
ivreg wage76 (grade76 = col4)
* Indirect least squares
reg wage76 col4

********** CLOSE OUTPUT
log close
* clear 
* exit