Identification in Finance and Social Science Assignment Information

Formal Coursework Instructions

Propose a way to measure the economic value of a product, service or activity using the concepts developed in the course, supplementing with additional research as required. Good papers will explain the difficulties involved, and outstanding papers will propose creative solutions that are likely to work and to be feasible, even easy. It is not necessary to carry out actual measurement.

For example, I might wish to measure the economic benefit to a typical student of an MBA. MBA students both self-select and are selected by schools and so are different from non-MBA students even before the effect, if any, of an MBA. Therefore comparing post-MBA earnings with a sample of non-MBA graduates gives a biased (i.e. wrong) estimate. A randomized controlled trial is not feasible. Exploiting a discontinuity may be possible: if a school used a cutoff GMAT score, for example, candidates just above the score would receive an offer while those just below would not. Comparing subsequent career outcomes between these two groups could give an unbiased estimate of the benefit. Alternatively it may be possible to use natural experiments involving unexpected changes of circumstances under which some admitted students were no longer able to take up their place, for example because of visa problems.

For ‘benefit of an MBA', substitute some topic more useful and interesting to yourself.

The word limit is 2,000. Word counts cover the main body of text, including tables, figures, and diagrams, and excluding appendices, footnotes, and references.