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Midterm Exam
11:40 a.m. 1:00 p.m., Thursday October 16, 2014
PACKET 1
Instructions
1. You may read this entire packet (Packet 1) as soon as you get it. DO NOT READ
PACKET 2 UNTIL YOU ARE TOLD.
3. The exam has two parts for a total of 100 points. Please put each part in a separate blue
book. Put your name and Harvard ID number on the cover of each blue book.
6. Please return this exam (both packets) with your completed blue books.
1-1
Introduction
Do bans on smoking in bars reduce the number of smokers? You will examine this question
using state panel data for 50 U.S. states in 9 years (2001-2009), for a total of 509 = 450
observations. The data set includes the smoking rate (the fraction of the adult population that
currently smokes), binary variables indicating whether states have smoking bans in bars, or in
restaurants, or in workplaces, and other related variables including the drinking rate.
The question being studied is similar to that in Problem Set 4, but the data set is different. The
Problem Set 4 data were 253,916 observations on individuals. In contrast, here the unit of
observation is a state in a given year.
Figure 1 is a plot, by year, of the number of states with a bar smoking ban and the smoking rate
in the state.
Table 2 (in Packet 2) contains regression results. Regressions (1) and (2) use only data from
2009 (50 observations). Regressions (3)-(6) use the full panel data set (450 observations).
1-2
Table 1. Variable Definitions and Summary Statistics
Data source: Center for Disease Control
Unit of observation: a state in a year, 50 states, 9 years (2001-2009); n = 450
1-3
Selected Tables from Stock and Watson, Introduction to Econometrics
1-4
1-5
Department of Economics Economics 1123
Harvard University Fall 2014
Midterm Exam
11:40 a.m. 1:00 p.m., Thursday October 16, 2014
PACKET 2
2-1
Table 2. Smoking Rates and Public Smoking Bans: Regression Results
Dependent variable: smokingrate
2-2
Part 1 (45 points) USE BLUE BOOK #1
2) (5 points) Suggest a reason why the coefficient on statebarban changes between regressions
(1) and (2). Your reason should explain the direction of the change in the coefficient from
regression (1) to (2).
3) (5 points) Suggest a reason why the coefficient on statebarban changes between regressions
(3) and (4). Your reason should explain the direction of the change in the coefficient from
regression (3) to (4).
5) (5 points) Regression (5) includes the variable, all3bans, which equals one if all three
smoking bans (workplace, restaurant, and bars) are in place and equals zero otherwise. Note
that you can perfectly predict the value of all3bans if you know the values of statebarban,
staterestban, and stateworkban (stated mathematically, all3bans =
statebarbanstaterestbanstateworkban). Does regression (5) suffer from perfect
multicolinearity? Why or why not?
2-3
Part 2 (35 points) USE BLUE BOOK #2
7) In a separate study using data on individuals between ages 18 and 30 (not on states, as is used
in Table 2), a researcher estimates the probit regression of whether or not an individual
currently smokes using as regressors the variables statebarban, female (which is one if the
individual is female), and age (the individuals age). The estimated probit coefficients on
these variables, and the intercept in the probit regression, are given in Table 3:
a) (5 points) Consider a 25 year old man living in a state with no bar smoking ban. Compute
the predicted probability that this man smokes.
b) (5 points). Is the predicted effect of a bar smoking ban statistically significantly different
from zero in this regression, holding constant the age and sex of the individual?
c) (5 points) Suppose instead that the researcher had estimated an OLS regression with
current_smoker as the dependent variable and the same regressors. State one advantage
and one disadvantage of this OLS regression, relative to the probit regression in the table.
9) (10 points) Idaho has a restaurant smoking ban, but not a bar smoking ban and not a
workplace smoking ban. Suppose the Idaho Governors office wants your assessment of the
evidence concerning the effect on smoking of adopting a bar smoking ban. Based on the
results in Table 2, in your expert judgment does adopting a bar smoking ban reduce the
smoking rate? Explain, with reference to specific regressions in Table 2 and arguments why
or why not the results provide a credible basis for providing this policy advice.
2-4