* to run regressions for VAT and non-VAT countries together
* generates Table 2 in  version submitted to JDE in 2006

set mem 20m

* use "C:\Researchpapers\KeenVATproject\data\OECDVAT.dta", clear
use "C:\Users\Ben Lockwood\Documents\researchpapers\KeenVATproject\dofiles\JDErevision\VAT.dta", clear

set mat 800

* generate additional variables needed

gen lnry=ln(ry)
gen lnypc=ln(ypcppp)
tsset cnumber year
gen lnry1 = L.lnry
gen lnry2 = L2.lnry
gen lnry3=L3.lnry
gen lnry4=L4.lnry
gen open1=L.open
gen open2=L.open1
gen ag1=L.ag
gen ag2=L.ag1
gen imf=imfncr+imfcr
gen fv1=L.fv
gen lnpop=ln(pop)

* to drop countries for which there are less than X observations

 gen cry=1 if ry<.

 * sort cnumber

*  by cnumber: egen sumcry = sum(cry)

* drop if sumcry<20

drop if year<1975

drop if dcrbo==1

drop if year>2000  

log using dynamic, replace

* 1 Basic OLS with CDs


reg lnry lnypc open ag  v cd*, r 
outreg using table2, replace

quietly predict resid, residuals
gen resid1=resid[_n-1] if cnumber==cnumber[_n-1]
quietly reg resid resid1, cl(cnumber)
test resid1
drop resid resid1 


* 2 Basic IV

ivreg lnry (lnry1= lnry3 lnry4)lnypc open ag  v cd*, r 
outreg using table2, merge

quietly predict resid, residuals
quietly reg resid lnry3 lnry4 lnypc open ag  v cd*
quietly gen overid=e(N)*e(r2) 
list overid  if _n==1
gen chi=chi2tail(1,overid)
list chi if _n==1
 

gen resid1=resid[_n-1] if cnumber==cnumber[_n-1]
quietly reg resid resid1, cl(cnumber)
test resid1
drop resid resid1 overid chi


* 3 Basic IV plus interactions

gen lnypcv=lnypc*v
gen openv=open*v
gen agv=ag*v
gen fedv=fed*v

ivreg lnry (lnry1 =  lnry3 lnry4) lnypc open ag  v lnypcv openv agv fedv cd*, r 
outreg using table2, merge

test v lnypcv openv agv

quietly predict resid, residuals
quietly reg resid lnry3 lnry4  lnypc open ag  v lnypcv openv agv fedv cd*
quietly gen overid=e(N)*e(r2) 
list overid  if _n==1
gen chi=chi2tail(1,overid)
list chi if _n==1


gen resid1=resid[_n-1] if cnumber==cnumber[_n-1]
quietly reg resid resid1, cl(cnumber)
test resid1
drop resid resid1 overid chi

* 4 interactions plus additional regressors

ivreg lnry (lnry1 =  lnry3 lnry4) lnypc open ag v lnypcv openv agv fedv depold depyoung imfcr imfncr lnpop cd*,  r 
outreg using table2, merge

quietly predict resid, residuals
quietly reg resid lnry3 lnry4  lnypc open ag  v lnypcv openv agv fedv depold depyoung imfcr imfncr lnpop cd*
quietly gen overid=e(N)*e(r2) 
list overid if _n==1
gen chi=chi2tail(1,overid)
list chi if _n==1


gen resid1=resid[_n-1] if cnumber==cnumber[_n-1]
quietly reg resid resid1, cl(cnumber)
test resid1
drop resid resid1 overid chi


 * 5 interactions plus additional regressors plus interactions with region dummies



gen deuv=deu*v
gen dasv=das*v
gen dafv=daf*v
gen dcrbov=dcrbo*v
gen dnmedv=dnmed*v
gen dapv=dap*v
gen dsiv=dsi*v

ivreg lnry (lnry1 =  lnry3 lnry4)  lnypc open ag v lnypcv openv agv fedv depold depyoung imfcr imfncr  lnpop deuv dasv dafv dcrbov dnmedv dapv dsiv cd*, noc r 
outreg using table2, merge

test v lnypcv openv agv fedv

quietly predict resid, residuals
quietly reg resid lnry3 lnry4  lnypc open ag  v lnypcv openv agv fedv depold depyoung imfcr imfncr lnpop deuv dasv dafv dcrbov dnmedv dapv dsiv cd*
quietly gen overid=e(N)*e(r2) 
list overid if _n==1
gen chi=chi2tail(1,overid)
list chi if _n==1

gen resid1=resid[_n-1] if cnumber==cnumber[_n-1]
quietly reg resid resid1, cl(cnumber)
test resid1
drop resid resid1 overid chi



* to perform Hausman test; fixed vs. random effects specification

* quietly reg lnry lnry1  lnypc open ag v lnpop imfncr imfcr depold depyoung lnypcv openv agv fedv cd*, noc r 

* est store fixed

* xtreg lnry lnry1 lnypc open ag v lnpop imfncr imfcr depold depyoung lnypcv openv agv fedv, re 

* hausman fixed ., eq(1:1)


* 6 interactions plus additional regressors, clustered by year to allow for spatial correlation

ivreg lnry (lnry1 =  lnry3 lnry4) lnypc open ag v lnypcv openv agv fedv depold depyoung imfcr imfncr   lnpop cd*, cl(year) 
outreg using table2, merge


test v lnypcv openv agv fedv

quietly predict resid, residuals
gen resid1=resid[_n-1] if cnumber==cnumber[_n-1]
quietly reg resid resid1, cl(cnumber)
test resid1
drop resid resid1 


* 7 - Allowing for Correlated Errors from the Probit Equation

gen v1=L.v
gen ry1=L.ry

quietly prob v lnypc open ag lnpop v1 depold depyoung fed fv1 imfcr imfncr ry1

predict p, xb

gen mills = -normalden(p)/normal(p)
gen mills2 = normalden(p)/(1-normal(p))
replace mills=mills2 if v==0

* coeff on mills  = covariance of u,e

ivreg  lnry (lnry1 =  lnry3 lnry4)  lnypc open ag v lnypcv openv agv fedv depold depyoung imfcr imfncr lnpop  mills cd*, noc r 
outreg using table2, merge

test v lnypcv openv agv fedv

quietly predict resid, residuals
quietly reg resid lnry3 lnry4  lnypc open ag  v lnypcv openv agv fedv depold depyoung imfcr imfncr lnpop mills cd*
quietly gen overid=e(N)*e(r2) 
list overid if _n==1
gen chi=chi2tail(1,overid)
list chi if _n==1


gen resid1=resid[_n-1] if cnumber==cnumber[_n-1]
quietly reg resid resid1, cl(cnumber)
test resid1
drop resid resid1 overid chi




clear

log close

translate dynamic.smcl dynamic.txt