Include all relevant Stata output.(Though you should not show the results of a regression more than once if you happen to run it multiple times)

1.Use the data in the file ps5q1.dta for this question. In 2003, the tax on cigarettes was increased in ten states. Data on cigarette consumption in 2000 and 2006 is provided for each state that increased its tax and for 35 additional states that did not. In order to estimate the effect of cigarette taxes on cigarette consumption, we will use the difference-in-difference estimator in which treatment is defined as a dummy equal to 1 if a state increased its cigarette tax and 0 otherwise (measured by thetaxvariable).

a.Manually create the difference-in-difference estimate of the treatment effect using mean values of theconsumptionvariable by year and treatment status.

b.Now create the difference-in-difference estimate using a regression, and write down the equation you are estimating.

c.Clearly interpret the difference-in-difference estimate from part (b). What assumption is required for the difference-in-difference estimator to be valid (i.e., for it to give you an unbiased estimate of the effect of a cigarette tax increase)?