Econ 710 PS3 Code

1. Code

rm(list=ls())
setwd("/Users/yendindin/Desktop/R/Econme 2")
library(haven)
library(dplyr)
library(ivreg)
library(sandwich)
library(dummies)

#data import
data <- read.csv("/Users/yendindin/Library/Mobile Documents/com~apple~CloudDocs/Master/Master Course/UWM/2021 Spring/Econometrics II/PS/3/AK91.csv")
data <- data %>%
  filter(sob<51)

#dummy construction
yobdf <- dummy(data$yob, sep = "")
qobdf <- dummy(data$qob, sep = "")
sobdf <- dummy(data$sob, sep = "")
data <- data %>%
  cbind(yobdf) %>%
  cbind(qobdf) %>%
  cbind(sobdf)
#2SLS formula
f1 <- paste("educ",
            paste(colnames(yobdf)[-1],collapse = "+"),
            paste(colnames(sobdf)[-1],collapse="+"),
            sep="+")
f2 <- paste(paste(colnames(qobdf)[-1],collapse = "+"),
            paste(colnames(yobdf)[-1],collapse = "+"),
            paste(colnames(sobdf)[-1],collapse="+"),
            sep="+")
f <- formula(paste("lwage~",f1,"|",f2,sep=""))
#2SLS
res <- ivreg(f,data=data)
restbl <- summary(res, vcov = sandwich, diagnostics = TRUE)
resbeta1 <- round(restbl$coefficients[2,],3)
#Note: Sandwich function for calculating heteroskadasticity robust standard error

2. Result of beta 1

print(resbeta1)

  Estimate Std. Error    t value   Pr(>|t|) 
     0.121      0.021      5.812      0.000