log using state_cig_data_1.log, replace

use state_cig_data


* generate real taxes
gen s_rtax=state_tax/cpi
gen f_rtax=federal_tax/cpi
gen s_f_rtax=s_rtax+f_rtax

label var s_rtax "state real tax on cigs, cents/pack"
label var f_rtax "federal real tax on cigs, cents/pack"
label var s_f_rtax "state+federal real tax on cigs, cents/pack"


* construct new variables

* time trend
gen trend=year-1981

* real per capita income
gen pcir=pci/cpi

label var trend "=1 in 1st year, 2 in second, etc"
label var pcir "real per capita income"

* run regression with tax, real income, trend and two taxes
* unrestricted model where both taxes enter
reg packs_pc trend pcir s_rtax f_rtax

*test the hypothesis that the coef is the same
test s_rtax=f_rtax

* do the f-test by brute force
* run the restricted model
reg packs_pc trend pcir s_f_rtax

log close