Econometrics paper

Econometrics II PAPER ASSIGNMENT 1. The paper should be an empirical investigation that employs estimation methods and test procedures we develop this quarter. You should estimate some interesting economic parameters and test hypotheses about them. Your report should focus on the econometrics that you do; it does not matter whether your results are “good” or “bad.” 2. You must use a cross-section data set on micro-level entities. Datasets that include variation over time (e.g., yearly observations on the same person or country) are not allowed; they often introduce challenges that we will not have time to address in this course. 3. The format of the paper is illustrated below. Please write in a concise, precise, and professional style; grammar, spelling, and style do count. Write in the active voice. When referring to published work, you should cite the source at the end of the sentence, as in (Jones, 2007). If you quote from published work, you should also identify the page from which the quote is drawn, as in (Jones, 2007: 41 - 42). 4. Write out the equation you plan to estimate using the names of the variables, e.g.:

wage = b0 + b1education + b2gender + b3age + e 5. Before you begin your research, you must get your topic approved. A short proposal and abstract will be included as problem set questions during the term. 6. The final paper is due Friday, June 12th, 5:00 p.m. Late submissions will be penalized 10 percentage points per calendar day or fraction thereof. Please submit the paper to me by email: [email protected]. 8. By submitting your paper, you agree that I have the right to subject it to a “textual similarity review” through Turnitin.com for the detection of plagiarism. Use of the Turnitin.com service is subject to the terms of use posted on the Turnitin.com website. Here are some starting points for data: http://econ.williams.edu/students/online-resources Here is an excellent resource for learning proper citation practices: http://www.library.georgetown.edu/internet/cite.htm

Format of paper The final version of the paper must be turned in as a hard copy. The text, not including the summary page or appendix, must not be longer than six pages, double spaced. I. INTRODUCTION One to two paragraphs. What is your research question? (Ex: “My research question is whether education affects wages later in life.”) Why is it interesting and important? Give a quick preview of your results (“I find that education does have a positive effect on wages.”) III. TEXT OF PAPER The hypothesis/hypotheses you plan to test. The results of the regression.

Your interpretation of the results. What do they mean in terms of your hypothesis? What are the implications of your findings?

The results of any additional tests (e.g. heteroskedasticity) and subsequent corrections.

Remaining concerns for future research (e.g. endogeneity) Conclusions IV. APPENDIX A summary table of your data (using the “sum” command in Stata). Relevant graphs, tables, and regression print-outs.

TITLES OF A SAMPLE OF SUCCESSFUL PAPERS

“How does an increase in minimum wage affect youth unemployment?” “Do Tertiary School Enrollment Rates Affect the Number of Homicides?”

“Does Being Born in the Fall or Winter Affect a Hockey Player’s Point Total?”

Criteria for grading paper: 1) Data source. You must find your own data source – you cannot use one of the datasets from our textbook (or any other textbook). 2) Correct interpretation of regression coefficients. This includes: a) Are you using a qualitative variable? If so, you must turn it into a dummy variable or set of dummies. b) Are any of your variables in logs? If so, you must interpret the coefficients accordingly. c) Interpret the sign of your coefficient. Does an increase in x cause y to go up or down? d) Interpret the magnitude of your coefficient. This means you must tell me what the actual number means (ex: increasing education by one year leads to a $1.00 increase in wages) and tell me whether this seems like a large or small effect (ex: this is a large increase, as it represents 10% of the average wage of $10.00). 3) Correct inference about regression coefficients. This includes: a) Correctly stating the null and alternative hypotheses that are used when testing for statistical significance. b) Correctly interpreting the t-stat, p-value or confidence interval. Is your coefficient statistically significant? c) What does it mean that your coefficient is statistically significant? (Ex: The coefficient on wages is statistically significant. This result shows that education does have an impact on wages.) 4) Test for heteroskedasticity a) Conduct and interpret a test for heteroskedasticity. b) If you do have heteroskedasticity, you must correct for it. 5) Discussion of your model and results. a) What are some variables that might be omitted from your model? b) Choose one potentially omitted variable. Using the formula for omitted variables bias, determine whether this omitted variable would bias your coefficient of interest upward or downward.