TABLE 12.1 Two Stage Least Squares Estimates of the Demand for Cigarettes Using Panel Data for 48 U.S. States Dependent variable: In(Qf'8gtten – In(Q£%gter) Regressor (1) (2) (3) In(Peigarettes - In(Peigarettes 1,1995 -1.20** (0.20) -0.94** -1.34** 1,1985 (0.21) (0.23) 0.43 (0.30) In(Inc,1995) – In(Incj,1985) 0.53 0.46 (0.34) (0.31) Intercept -0.12 (0.07) -0.02 (0.07) -0.05 (0.06) Both sales tax and Instrumental variable(s) Sales tax Cigarette-specific tax cigarette-specific tax First-stage F-statistic 33.70 107.20 88.60 Overidentifying restrictions J-test and p-value 4.93 (0.026) These regressions were estimated using data for 48 U.S. states (48 observations on the 10-year differences). The data are described in Appendix 12.1. The J-test of overidentifying restrictions is described in Key Concept 12.6 (its p-value is given in parentheses), and the first-stage F-statistic is described in Key Concept 12.5. Individual coefficients are statistically significant at the *5% significance level or **1% significance level. Suppose that the Federal Government is considering a new tax on cigarettes that is estimated to increase the retail price by $0.25 per pack. If the current price per pack is $6.75, use the regression in column (2) to predict the change in demand. What is the (approximate) predicted percentage change in the quantity of cigarettes? Report your answer as a percentage to two decimal places without a percentage sign.
TABLE 12.1 Two Stage Least Squares Estimates of the Demand for Cigarettes Using Panel Data for 48 U.S. States Dependent variable: In(Qf'8gtten – In(Q£%gter) Regressor (1) (2) (3) In(Peigarettes - In(Peigarettes 1,1995 -1.20** (0.20) -0.94** -1.34** 1,1985 (0.21) (0.23) 0.43 (0.30) In(Inc,1995) – In(Incj,1985) 0.53 0.46 (0.34) (0.31) Intercept -0.12 (0.07) -0.02 (0.07) -0.05 (0.06) Both sales tax and Instrumental variable(s) Sales tax Cigarette-specific tax cigarette-specific tax First-stage F-statistic 33.70 107.20 88.60 Overidentifying restrictions J-test and p-value 4.93 (0.026) These regressions were estimated using data for 48 U.S. states (48 observations on the 10-year differences). The data are described in Appendix 12.1. The J-test of overidentifying restrictions is described in Key Concept 12.6 (its p-value is given in parentheses), and the first-stage F-statistic is described in Key Concept 12.5. Individual coefficients are statistically significant at the *5% significance level or **1% significance level. Suppose that the Federal Government is considering a new tax on cigarettes that is estimated to increase the retail price by $0.25 per pack. If the current price per pack is $6.75, use the regression in column (2) to predict the change in demand. What is the (approximate) predicted percentage change in the quantity of cigarettes? Report your answer as a percentage to two decimal places without a percentage sign.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:TABLE 12.1
| Two Stage Least Squares Estimates of the Demand for Cigarettes Using
Panel Data for 48 U.S. States
Dependent variable: In(Qfte) – In(Qfte)
cigarettes
Regressor
(1)
(2)
(3)
In(Peisarettes) - In(Pçigarettes
-0.94**
-1.34**
-1.20**
i,1995
i,1985
(0.21)
(0.23)
(0.20)
In(Inc;1995) – In(Inc;1985)
0.53
(0.34)
0.43
(0.30)
0.46
(0.31)
Intercept
-0.12
-0.02
-0.05
(0.07)
(0.07)
(0.06)
Both sales tax and
Instrumental variable(s)
Sales tax
Cigarette-specific tax
cigarette-specific tax
First-stage F-statistic
33.70
107.20
88.60
Overidentifying restrictions
J-test and p-value
4.93
(0.026)
These regressions were estimated using data for 48 U.S. states (48 observations on the 10-year differences). The data are
described in Appendix 12.1. The J-test of overidentifying restrictions is described in Key Concept 12.6 (its p-value is given in
parentheses), and the first-stage F-statistic is described in Key Concept 12.5. Individual coefficients are statistically significant at
the *5% significance level or **1% significance level.
Suppose that the Federal Government is considering a new tax on cigarettes that is estimated to increase the retail price by $0.25 per pack. If the current price per pack is $6.75, use the regression in column
(2) to predict the change in demand.
What is the (approximate) predicted percentage change in the quantity of cigarettes? Report your answer as a percentage to two decimal places without a percentage sign.
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