economic project

Elementary Econometrics Project Spring 2017

Due April 13 by 5:00 pm The paper must be uploaded to Carmen in a .pdf form. The turn-it-in feature is enabled, meaning any paper that plagiarizes from another person who has ever completed this paper in my class will be flagged.

1 Basic Description

Objective: The purpose of this class is to apply the analytical and quantitative skills which should be acquired in this course. The final project should be a professional looking manuscript with easily interpreted graphics and charts. Description: The project requires using statistical techniques learned in this course to analyze data from the 1997 National Longitudinal Survey of Youth. The specific topic that you ex- amine is up to you. Formatting: All aspects of your final paper must be typed. The paper should be double spaced with font of at least 11 point. There is no minimum number of pages. There is a strict maximum of 10 pages including title page, tables, graphs, and appendices. Anything beyond 10 pages will not be graded. The paper should include the following sections: introduction, data, empirical methodology, results, and conclusions. Data: You will use the data set nlsy97 small.dta found on Carmen. The data is a subsample of the 1997 NLSY. The data set is funded by the BLS. They describe the data as follows: The NLSY97 consists of a nationally representative sample of approximately 9,000 youths who were 12 to 16 years old as of December 31, 1996. Round 1 of the survey took place in 1997. In that round, both the eligible youth and one of that youth’s par- ents received hour-long personal interviews. In addition, during the screening process, an extensive two-part questionnaire was administered that listed and gathered demo- graphic information on members of the youth’s household and on his or her immediate family members living elsewhere. Youths are interviewed on an annual basis. The subset of data that you are given contains only 1199 observations, so that it can be analyzed with small STATA. To avoid the complexity of working with panel data, the time aspect is taken out. There are literally thousands of data points available, but I have narrowed it to the variables shown in table 1.

2 Variable definitions

Table 1: Variable Definitions Variable Name Description

grades8 Grades in 8th grade gradeshs Grades in High School

health 1997 Self Reported Health as an adolescent icecream 1997 Favorite Ice Cream Flavor as an adolescent

hardtimes 1997 Whether your family experienced ”Hard Times” as a child” census region 1997 The census region resided in as an adolescent

income gross yr 1997 Household income of family when respondent was an adolescent msa 1997 MSA of residence as an adolescent

urban rural 1997 Urban or rural residency as an adolescent race ethnicity Race and Ethnicity

asvab Armed Services Vocational Aptitude Battery percentile marstat 2013 Marital and cohabitation status

job Have a job? income Current (2013) income of the respondent weight Weight (pounds)

health 2013 Current (2013) self reported health momsedu Highest level of education achieved by mother

Many of the variables are categorical. Simply type ”tab variable” and stata will display how many observations belong to each category and what those categories indicate.

3 Commonly missed Points

Grammar Do not simply write your paper in another language and use google trans- late to change it to English. Those papers are nearly impossible to read. Reading the paper out loud to yourself before you hand it in will help tremendously. Following Directions Include everything that is on the attached grading rubric and in the correct section. Potential Problems with your regression All methodologies have some potential problems. When you address those problems in the methodology section do not include problems that you can fix with your current skills and data, specifically discuss which coefficients could be affected and the direction of the affect. Equation The equation that is written out in the empirical methodology section must be the same equation used to generate the tables. If the equation has perfect multi- collinearity or treats categorical variables as continuous, there will be large deductions. Tables and graphs checklist Missing any part of the checklist will result in significant deductions.

• Tables and graphs must be understandable without reading the text. This means there should be a clear title that explains the contents of the table, such as ”Sum- mary Statistics”.

• Do not use variable names in tables and figures.For example, rather than momedu my table should say ”Mother’s Education”.

• There should also be a footnote which adds some detail to the and explains what is shown. For example ”Each entry is an OLS coefficient with standard errors in parentheses. Stars represent p-values as ...”

• If plotting distribution in a figure, use percent as the y-axis.

• All figures and tables should be referenced in the text.

• Figures must show more than just means.

• Cut and pasting from the stata output window will get 0 points. Use the estout program to create the tables or type them in a word processing program.

A condensed version of this form will be used to grade papers.

1. Formatting 10pts: The paper conforms to the formatting standards outlined in the assignment: Double spaced, font, margins, less than 10 pages, includes a title, and stapled.

2. Organization 10pts:

• Ideas are presented clearly, free of spelling and grammatical errors. Any references are cited. (-1 for each instance1)

• The paper is not cut and pasted from homeworks and transitions well be- tween sections. (5) (Not a list of tasks.2)

1Up to 20 points can be deducted 2If your paper is just a list of tasks and does not resemble a research paper, you will be deducted

20 points.

• Each assigned section is included and labeled. (5)

3. Introduction 5pts: The question to be analyzed is described. The importance of the question is discussed. The data source is mentioned. The empirical methodology is mentioned. (OLS) A preview of results is given

4. Data Section 15pts:

• The source of the data is mentioned. There is a brief discussion of means, standard deviations, etc. of the wage variable and whatever other variable(s) on which you choose to focus. (5)

• A summary table with means and standard deviations which is referenced in the text. (5)

• At least one graphic (histogram(don’t use density), scatter plot, etc.) which describes data and is referenced in the text.(5)

5. Empirical Methodology 15pts

• The question being analyzed is clearly described and the estimated equation is written out. (5)

• The inclusion of each variable is supported by theoretical reasoning and predicted signs of each variable are discussed. (5)

• Potential concerns with sample selection, omitted variables, etc. are dis- cussed along with the consequences of those problems. (5)

6. Results 30pts

• Results table. (7) • Interpretation of coefficients (8) (You must interpret at least 4 coefficients

including 1 dummy variable and 1 coefficient with a logged dependent vari- able.)

• Hypothesis testing: discuss which coefficients are statistically significant at a 5% significance level; discuss the R2 of the regression; conduct an F-test on some aspect of the regression results. (5)

• Use your estimates to predict the earnings of some hypothetical people. (3) • Discuss the consistency of your results with your predictions. (2) • Estimate an alternative specification, present (in a table) and discuss. (5)

7. Conclusion 5ptsThe conclusion summarizes results and the signifi- cance of those results.

8. Overall Quality 10 pts This is the only subjective portion of your grade. The average score will be 6/10.