Applied Economic Analysis

1. Use the grade data for the following:

Grade = final grade in an intermediate microeconomics course, which takes the value of 1 if the grade is A and 0 if it is not A

GPA = Grade point average

TUCE = Score given on the Test of Understanding in Economics

PSI = Personalized System of Instruction

The exercise is to determine the factors that affect the probability of receiving an A in the intermediate micro course.

Fit the logit model to these data and interpret your results. How do we determine the probability that a student receives an A in his/her microeconomics course if he/she has the following: GAP = 3.92, TUCE = 29, and PSI = 0?

2. Describe the consequences of (i) underfitting a model and (ii) overfitting a model.

3. Interpret the meaning of the coefficients in the following regressions:

Y_i = β₁ + β₂X_i + u_i

ln Y_i = β₁ + β₂lnX_i + u_i

ln Y_t = β₁ + β₂lnX_i + u_i

Can we compare R2 for the first two regressions?Part II: Part II is comprised of a report-type research paper on an economic topic chosen by you. You may work in a team of two. The report comprises a detailed description of the question/issue examined, motivation for the question/issue examined, and relevant descriptive statistics. The report should be between 5 - 10 pages.

Part III: Part III is a continuation of Part II and undertakes theoretical and empirical analyses of the economic topic chosen in Part II. The findings are presented to the class. Part III consists of: (i) the theoretical and empirical model, (ii) data sources and methodology, and (iii) the empirical results and conclusion. The final paper is to be 15-25 double-spaced typed pages. Presentations are 15 minutes with a question/discussion period. All students are required to attend and participate in the presentations by asking good questions and offering good insights.

DOING RESEARCH IN ECONOMICS

I. STEPS IN PREPARING YOUR RESEARCH PROJECT

A research project typically can take one of two forms: (i) an analysis of a research question or (ii) a descriptive analysis of a specific issue. The former is more of an "academic type" format and the latter is more of a "report type" format. You will do both on the same topic in parts II and III.

(i) SELECTING A TOPIC/QUESTION

Choose a topic in Economics that is interesting to you and that would be interesting to outside readers. This provides part of the motivation for your project. Then begin reading about it in the literature and gathering information on the topic. It is recommended that you begin with the most recent literature and work your way backwards. The most recent literature often provides references and information about past research. The literature will give you ideas about what has already been done and what remains to be done in this area.

To learn about the academic literature, you can use databases such as ECONLIT or SSCI, or you can use a web search such as Google or Google Scholar.

Data sources available at Bishop's will be provided in class. Note that other data sources are available online.

One key advice is to keep the topic simple and specific. Another key advice is to begin your project early. You will likely find that gathering data can sometimes be very difficult and very time consuming. The research question/topic must be feasible given your time constraints and the availability of data.

(ii) DEVELOP A HYPOTHESIS

An "academic type" paper involves a research question. Your hypothesis is the proposed answer to this question. Your hypothesis must be grounded in theory; that is, it must be clear why you propose this answer to the research question.

(iii) TEST YOUR HYPOTHESIS

Following from (ii), to test your hypothesis, you have to gather relevant data and employ econometric techniques that you have learned in EMA 261. Here you are comparing your statistical results to your hypothesis. Are your results consistent with the predictions from theory? Be sure to check for problems with econometric testing such as heteroscedasticity or autocorrelation.

(iv) DEVELOP A SPECIFIC OBJECTIVE

A "report type" paper needs to be specific about its objective.

(v) ANALYSIS OF THE TOPIC

Following from (iv) for a "report type" project, you have to gather relevant data and information about your topic. Analysis of the data employs statistical and econometric techniques. Here, your analysis is mostly descriptive and may entail predictions/trends.

II. WRITING YOUR PAPER

A research paper must be well-organized and well-written. To be well-written, a paper needs editing and revising (i.e. it cannot be written at the last minute). The paper must have structure and include most or all of the following:

(i) Introduction:

The introduction states clearly the research question or objective, hypothesis, and its motivation. It is very important to motivate your research question or objective. Motivating the question/objective entails describing to the reader why it is an important one and sparks their interest in reading your paper.

(ii) Descriptive statistics

Here, you provide descriptive statistics about the variables of interest showing trends, etc.

(iii) Literature Survey

The literature survey reviews the theoretical and empirical literature of your topic. You don't need to go into a lot of detail about each paper, but it should be clear to the reader what the literature has already examined.

(iv) Theoretical Analysis (for an "academic type" project)

Here, the theory behind your hypothesis is presented.

(v) Empirical Analysis

This section is comprised of (a) a description of your data, including the source, sample period, descriptive statistics, etc, (b) the econometric model, if any, you are employing, and (c) the econometric testing of your hypothesis, if any. A "report type" project is confined to (a).

Note that for (b), the econometric model is based on theory. The connection between the econometric model and the theory should be clear to the reader. The discussion of the model used must relate the explanatory and dependent variables to the theory. Part (c) also involves an interpretation of your results.

(vi) Conclusion

The conclusion summarizes your analysis. Your conclusion can also provide policy implications if relevant, and any limitations of your analysis.

Part 2 7 Pages 2100 Words
Part 3 18 Pages 5400Words
500 Words in 8 PPTS