clear

set obs 5000
gen id = _n
gen log_wealth_gen1 = rnormal(2.24,1.72)

local sigma_u = (1.72^2 - `1'^2)^.5
gen x_gen1 = log_wealth_gen1 - rnormal(0,`sigma_u')
	
gen x_gen2 = `2'*x_gen1 + rnormal(0,`3')
gen log_wealth_gen2 = x_gen2 + rnormal(0,`sigma_u')
gen x_gen3 = `2'*x_gen2 + rnormal(0,`3')
gen log_wealth_gen3 = x_gen3 + rnormal(0,`sigma_u')
gen x_gen4 = `2'*x_gen3 + rnormal(0,`3')
gen log_wealth_gen4 = x_gen4 + rnormal(0,`sigma_u')
gen x_gen5 = `2'*x_gen4 + rnormal(0,`3')
gen log_wealth_gen5 = x_gen5 + rnormal(0,`sigma_u')
	
reg log_wealth_gen5 log_wealth_gen4
	
sort log_wealth_gen1
gen status = ""
replace status = "rich" in 4000/5000
replace status = "middle" in 2000/3000
replace status = "poor" in 1/1000