Introductory Econometrics: A Modern Approach 6th Edition by Jeffrey M Wooldridge

Exercise 12

In 1985, neither Florida nor Georgia had laws banning open alcohol containers in vehicle passenger compartments. By 1990, Florida had passed such a law, but Georgia had not.

(i) Suppose you can collect random samples of the driving-age population in both states, for 1985 and 1990. Let arrest be a binary variable equal to unity if a person was arrested for drunk driving during the year. Without controlling for any other factors, write down a linear probability model that allows you to test whether the open container law reduced the probability of being arrested for drunk driving. Which coefficient in your model measures the effect of the law?

(ii) Why might you want to control for other factors in the model? What might some of these factors be?

(iii) Now, suppose that you can only collect data for 1985 and 1990 at the county level for the two states. The dependent variable would be the fraction of licensed drivers arrested for drunk driving during the year. How does this data structure differ from the individual-level data described in part (i)? What econometric method would you use?

Step 1 of 4

It is given that in 1985, there was no law banning open alcohol containers, but by 1990, Florida passed on law regarding this but Georgia did not. This problem is based on data collected of driving age population.