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Econometrics Problem Set 5

# Econometrics Problem Set 5

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Pset from James Stock's Econometrics Class at Harvard
Pset from James Stock's Econometrics Class at Harvard

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12/20/2012

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Tarun SinghWorked With:Alexander Marcus and Alex Sloan
Economics 1123, Problem Set 5
1)
a) The coefficient on shall in regression (ii) seems to show that thepresence of a shall-carry law decreases the amount of violent crime by36.83%. This number is large in the “real world” sense because it seemsto suggest that 36.83% of violent crime can be prevented by allowingpeople to carry concealed weapons.b) Adding the control variables in regression (ii) does not change ourconclusion about the effect of shall-carry laws. Although adding thecontrol variables did reduce the coefficient on shall by .0746, thecoefficient was still very large and still statistically significant, so it doesnot change our conclusion.c) A variable which may vary from state to state but varies little over timecould be the marriage rate. The marriage rate may lead to OVB as theremay be a correlation between gun ownership and marriage rate that maybe left out. Another variable that may lead to OVB could be incomeinequality in a state. This income inequality would differ from state tostate but most likely differ little over time, and if there is a correlationbetween income inequality and certain types of crime this could also leadto OVB.2)
Table 1The Effect of Concealed Handgun Laws on Violent Crime: RegressionResults
Dependent variable: ln(
vio
)
(1)(2)(3)(4)(5)
Coefficient on
shall
-.4429646(.0475283)-.3683869(.0347879)-.0461415(.0199433 )-.0279935(.0193733)-.02799(.0416386)State characteristiccontrol variables
a
?NoYesYesYesYesState fixed effects?NoNoYesYesYes Year fixed effects?NoNoNoYesYes
-statistic testingthe hypothesis thatthe state fixedeffects are zero210.38(0.000)291.42(0.000)
-statistic testingthe hypothesis thatthe year fixedeffects are zero14.63(0.000)20.67(0.000)HAC (clustered) SEs?NoNoNoNoYes
N
11731173117311731173

Notes
: All regressions include an intercept. For regressions (1) (4),heteroskedasticity-robust standard errors appear in parentheses belowestimated coefficients; for regression (5), the standard errors areheteroskedasticity-robust and clustered at the state level, so as to allow forserial correlation in the error within a state.
p
-values appear in parenthesesbeneath heteroskedasticity-robust
-statistics (or, for regression (5),heteroskedasticity-robust-clustered
-statistic).
a
Regressions with “state characteristic control variables” include the followingregressors:
incarc_rate, density
,
avginc
,
pop
,
pb1064
,
pw1064
,
pm1029
.
Table 2The Effect of Concealed Handgun Laws on Robberies: Regressionresults
Dependent variable: ln(
rob
)
(1)(2)(3)(4)(5)
Coefficient on
shall
-.7733207(.0692623)-.5288202(.0510021)-.0078189(.0264428).0268298(.0252406).0268298(.0533564)State characteristiccontrol variables
a
?NoYesYesYesYesState fixed effects?NoNoYesYesYes Year fixed effects?NoNoNoYesYes
-statistic testing thehypothesis that thestate fixed effects arezero190.47(0.000)247.55(0.000)
-statistic testing thehypothesis that theyear fixed effects arezero12.32(0.000)24.73( 0.000)HAC (clustered) SEs?NoNoNoNoYes
N
11731173117311731173
Notes
: See the notes to Table 1.
Table 3The Effect of Concealed Handgun Laws on Murders: Regressionresults
Dependent variable: ln(
mur
)
(1)(2)(3)(4)(5)
Coefficient on
shall
-.4733725(.048536)-.3131735(.0357019)-.06081(.0272138)-.0149524(.0272247)-.01495(.039106)State characteristiccontrol variables
a
?NoyesyesYesYes

State fixed effects?NoNoYesYesYes Year fixed effects?NoNoNoYesYes
-statistic testing thehypothesis that thestate fixed effects arezero88.22(0.0000)106.12( 0.000 )
-statistic testing thehypothesis that theyear fixed effects arezero12.62(0.0000 )18.75(0.000)HAC (clustered) SEs?NoNoNoNoYes
N
11731173117311731173
Notes
: See the notes to Table 1.3) As seen in the tables above, adding fixed state effects changes theconclusions we had reached. In all three tables adding fixed state effectsdecreased the coefficient on shall, meaning when we account for fixed stateeffects, shall carry laws have less of an effect reducing violent crime rates.Similarly, when adding fixed time effects the coefficient on shall changes inall three tables, however, this change is much smaller than the change seenby adding fixed state effects and the change caused by fixed time effectscauses the coefficient to either increase or decrease depending on whichtable we are looking at. Looking at the F-statistic testing the null hypothesisthat the fixed year effects are zero, we see that we reject the null hypothesisin all three tables. This leads me to believe that the best regression is eitherregression 4 or regression 5 as both would capture the OVB that would bepresent if we omitted fixed state effects and fixed time effects. The clustered standard errors are larger than the conventionalheteroskedasticity-robust errors, however our conclusions are not sensitive tothe use of clustered standard errors since the coefficient on shall was notsignificant in any of the regressions when adding fixed state effects and fixedtime effects. The regression data shows us that allowing for shall carry laws slightlyreduces violent crime and murder rates but also slightly increases robberies.However, the data also shows that allowing for shall carry laws has nostatistically significant effect on violent crimes, robberies or murders. The differences in these estimates across crime rates are consistent with thedifferences in the natures of these crimes. For example, violent crimes andmurders tend to be crimes of passion so if there are more relaxed guncarrying laws victims will be better able to defend themselves, and this maydissuade their assailants, thus the slight negative coefficients for shall whenlooking at violent crimes and murder make sense. Robberies on the otherhand are often pre-meditated, and if people can carry guns easier they havea greater ability to use the guns to rob a store which may be what is leadingto the slight positive coefficient for shall when looking at robberies. The possibility of OVB due to a correlation between income inequality andcertain violent acts still remains. It would be interesting to look at data that