04 Jun Question Empirical Project Econometrics
Question
Empirical Project
Econometrics
One important learning objective for this course is to learn the econometric skills re- quired to do basic empirical research in economics. In this assignment you are asked to develop an economic question of interest to you, build an econometric model that you can use to answer the question, use the data provided to form a preliminary answer to your question, and describe what next steps you would take if you had more time and/or bet- ter data. As intended, this will require you to understand what you are learning in the lectures in a more hands-on environment. The assignment will force you to confront some of the common, practical issues that arise in data analysis. It will allow you to connect the sometimes annoyingly abstract econometrics class material to economic concepts and issues that interest you.
This assignment has two separate projects. A Proposal AND the Final Paper must be submitted. Please read this whole document very carefully.
1. Proposal
First Project -You must submit a proposal to me. The proposal should not exceed three typed pages, double-spaced, size 12 font, excluding any tables and/or figures. It must include the following:
(1) a description of your research question: The research question should take the form of “what is the effect of X on Y ”. It does not have to be worded this way as the interpretation of your research question will depend on the context. Your research question may also be slightly more complex than this, which is ok.
(2) An initial (maybe naive) answer to the question. For example, this may be as basic as a scatter plot of Y versus X , along with a description of what the data seems to be suggesting.
(3) A short description of (i) why the initial answer is not a complete answer. The most common reason here will be that there are important omitted variables, in which case you are expected to discuss some of these potential omitted variables.
(4) A very brief outline of how you might be able to use the data available to address the problems described.
Second Project:
2. Final Draft
You must include your proposal along with my comments with the final paper. The paper must be at least five pages and no longer than ten pages, double-spaced, size 12 font, excluding tables and figure. Your paper must have a title. The title does not have to be creative. Often thinking about a concise title for your paper is a good way to organize your own thoughts about the goals of your paper. In addition, the final paper must be organized into the following four sections, labeled as such. Please read these carefully because I will be looking for these items when I grade your paper.
Introduction. The introduction should describe succinctly the research question you wish to answer, how you have decided to approach it, and your most impor- tant numerical results. The introduction should convince me that the question is interesting, that you have thought carefully about how to approach it, and that you understand your results. You must also find at least one research article that has considered a closely related economic question. You should briefly describe their main results. This is meant to help motivate your paper. Your introduction should not be more than two pages of the final paper.
Econometric Model. This section is where you describe in detail the research question you have proposed and how you will approach it. You must describe what
regressions you will run, starting with the baseline regression model. You must also describe what hypothesis tests you will perform. Remember our discussion in class of the steps to go through in specification of a regression analysis and try to follow these steps both in your actual analysis in Stata and in the paper. As part of this section you should consider the assumptions of the regression model and address possible reasons that these assumptions would be violated. While you do not need to report in the paper every single regression you estimated, I expect to see more than one regression.
Description of Data and Results. First, very briefly describe the data you are using. This must include a table of summary statistics (sample mean, sample stan- dard deviation, range, etc.) of the X and Y variables, as well as important control variables that will be used in your analysis. Give a brief description of the summary statistics, at least for the X and Y variables in your analysis.
The results of your econometric analysis should be reported as professionally as pos- sible. Take a look at some journal articles to see how empirical results are usually reported. You should include both a table (or tables) summarizing your results and a written summary of the results. You should be able to interpret your results in relation to the economic question you have posed. Be careful to consider the units of measurement and remember the “all else equal” interpretation of the regression. Do not copy and paste a table from Stata into your paper without reformatting the table
– this does not look very professional and does not demonstrate that you understand the Stata output.
Conclusion. This only needs to be a paragraph or two. Summarize your results in a few sentences and describe the shortcomings of your analysis and what your next step would be to address these shortcomings if you had additional time and/or additional data.
4. The Data
I am giving you the choice of two datasets to use for this project. Only use one of them! Both will be available in Stata format. There are also descriptions of the variables provided. If you have any questions about the interpretation of the values of your variables, send me an email (but read the documentation carefully first, and also do some tabulations to try and understand things yourself !).
1. Country-level Data (BACE Data) This dataset consists of roughly 70 variables ob- served for a sample of 88 countries. (This data was collected by Professor Tara Sinclair.)
2. State-level Census Data (State Data) This dataset consists of approximately 50 vari- ables observed for the 50 states and the District of Columbia in the 1980, 1990 and
2000 Censuses. I have also merged in data for the same years for the number of dif- ferent types of crimes, different causes of death, and house prices. I have organized so it is already a panel dataset. (This data was collected by Professor Tim Moore.)
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