Question 5

This exercise refers to the drunk driving panel data regression, summarised in Table 10.1 on pages 31 and 32 of the Lecture 8 slides. Arizona has a population of I28 million people. Suppose that Arizona increased the tax on a case of beer by $2 (in 1988 dollars). Use the results in column (6) to predict the number of lives that would be saved over the next year {two decimal places). TABLE 10.1 Regression Analysis of the Effect of Drunk Driving Laws on Traffic Deaths Dependent variable: traffic fatality rate (deaths per 10,000). Regressor (1) (2) (3) (4) (5) (6) (7) Beer tax 0.36** -0.66* -0.64+ -0.45 -0.69* -0.46 -0.93** (0.05) (0.29) (0.36) (0.30) (0.35) (0.31) (0.34) Drinking age 18 0.028 -0.010 0.037 (0.070) (0.083) (0.102) Drinking age 19 -0.018 -0.076 -0.065 (0.050) (0.068) (0.099) Drinking age 20 0.032 -0.100+ -0.113 (0.051) (0.056) (0.125) Drinking age -0.002 (0.021) Mandatory jail 0.038 0.085 0.039 0.089 or community service? (0.103) (0.112) (0.103) (0.164) Average vehicle 0.008 0.017 0.009 0.124 miles per driver (0.007) (0.011) (0.007) (0.049) Unemployment rate -0.063** -0.063** -0.091** (0.013) (0.013) (0.021) Real income per capita 1.82** 1.79 1.00 (logarithm) (0.64) (0.64) (0.68) Years 1982-88 1982-88 1982-88 1982-88 1982-88 1982-88 1982 & 1988 only State effects? no yes yes yes yes yes yes Time effects? no no yes yes yes yes yes Clustered standard errors? no yes yes yes yes yes yesF-Statistics and p-Values Testing Exclusion of Groups of Variables Time effects = 0 4.22 10.12 3.48 10.28 37.49 (0.002) (