Introduction to Econometrics 3rd Edition by James Stock, Mark Watson

Exercise 14

It has been conjectured that workplace smoking bans induce smokers to quit by reducing their opportunities to smoke. In this assignment you will estimate the effect of workplace smoking bans on smoking using data on a sample of 10,000 U.S. indoor workers from 1991 to 1993, available on the textbook Web site wwvv.pearsonhighered.com/stoek_watson in the file Smoking. The data set contains information on whether individuals were or were not subject to a workplace smoking ban, whether the individuals smoked, and other individual characteristics. 7 A detailed description is given in Smoking_Description, available on the Web site.
a. Estimate the probability of smoking for (i) all workers, (ii) workers affected by workplace smoking bans, and (iii) workers not affected by workplace smoking bans.
b. What is the difference in the probability of smoking between workers affected by a workplace smoking ban and workers not affected by a workplace smoking ban Use a linear probability model to determine whether this difference is statistically significant.
c. Estimate a linear probability model with smoker as the dependent variable and the following regressors: smkban, female, age, age 2 , hsdrop, hsgrad, colsome, colgrad, black, and hispanic. Compare the estimated effect of a smoking ban from this regression with your answer from (b). Suggest a reason, based on the substance of this regression, explaining the change in the estimated effect of a smoking ban between (b) and (c).
d. Test the hypothesis that the coefficient on smkban is zero in the population version of the regression in (c) against the alternative that it is nonzero, at the 5% significance level.
e. Test the hypothesis that the probability of smoking does not depend on the level of education in the regression in (c). Does the probability of smoking increase or decrease with the level of education
f. Based on the regression in (c), is there a nonlinear relationship between age and the probability of smoking Plot the relationship between the probability of smoking and age for 18 age 65 for a white, non-Hispanic male college graduate with no workplace smoking ban.