LAURIER Business & Economics

Syllabus for EC655 Econometrics Fall 2011

Instructor: Email: Ofce Location: Ofce Hours: Phone: Faculty Assistant: Course Website: Meeting Time: Meeting Location:

Jean Eid jeid@wlu.ca P3010 Tuesdays and Thursdays 10:30-12:00 (519) 884-0710 ext. 2262 Leysa Ligaya ext. 2720 http://mylearningspace.wlu.ca Tuesdays, and Thursdays 1:00-2:20 3-105 DAWB

Description and Objective This is the rst graduate course in econometrics. This course will introduce you to econometric modeling and techniques with emphasis on applied econometrics. Econometric theory will also be examined with emphasis on proofs and derivations. The theory will be exposed with univariate as well as matrix algebra. There are two reasons for adopting this unied approach. First, this may be a terminal econometrics course for some of you who may not want to pursue a PhD but wish to work (or end up ) as econometric practitioners with the MABE diploma. The course will provide those students with a variety of applications so that they can carry out empirical work successfully in the real world. In addition, the material this course covers will be extremely useful in EC681 where you are asked to research a topic of interest. Second, for those wishing to pursue their PH. D, the course will provide them with the theoretical background necessary for taking advanced econometrics courses. To achieve a sufcient balance between applied econometrics and theoretical econometrics, the material will therefore be presented with and without resorting to matrix algebra. A good background to the tools used in this course would be the appendices in Introductory Econometrics: A Modern Approach by Jeffrey Wooldridge . You do not need the most current edition.

School of Business & Economics Wilfrid Laurier University, Waterloo, Ontario, Canada N2L 3C5 Telephone: 519.884.0710 Fax: 519.884.0201 or 519.888.1015 www.wlu.ca/sbe

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As you have seen already or soon discover, econometrics is a combination of economic theory, statistical theory, and computer application. Although no advanced skill in statistics is required, you must however be prepared to adapt to new statistical concepts and symbols commonly used in discussing econometric theory. Econometrics is a highly specialized eld of economics that deals specically with the formulation (model-building) and estimation of casual relationships among economic variables. Using applied econometrics, an economist can accomplish the following objectives: 1- Perform structural analysis of the effects (marginal and partial) of exogenous factors on the variable whose behavior we seek to explain 2- Test hypotheses about new and existing economic theories 3- Evaluate and implement policy in government and business using the estimated econometric model We will demonstrate how the tools of econometrics can be used to full these objectives. Text and software o The text for this course is Mostly Harmless Econometrics by Joshua Angrist, and J rn-Steffen Pischke We will also make heavy use of Introductory Econometrics: A Modern Approach by Jeffrey M. Wooldridge any edition will work I will be supporting two statistical packages: This software is FREE, so you can download it and install it on your computer. The software is available for Windows, Mac, and Linux. Please download this software as soon as possible if you plan on using it Stata. This software is not free but is thought to be more user friendly than R above. This is available in the lab. R. Ethics The atmosphere in this course should promote the free exchange of information and aid. Students are encouraged to seek help from the instructor, and fellow students regarding concepts, examples, and problems that are not to be submitted for a grade. The suggested problems in each homework assignment are an excellent opportunity for collaborative work; However, it is highly recommended that you individually try these problems rst before asking for any help.

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Accessible Learning Statement Students with disabilities or special needs are advised to contact Lauriers Accessible Learning Centre for information regarding its services and resources. Students are encouraged to review the Calendar for information regarding all services available on campus. Academic and Research Misconduct You are reminded that the University will levy sanctions on students who are found to have committed, or have attempted to commit, acts of academic or research misconduct. You are expected to know what constitutes an academic offense, to avoid committing such offenses, and to take responsibility for your academic actions. For information on categories of offenses and types of penalty, please consult the relevant section of the Undergraduate Academic Calendar. If you need clarication of aspects of University policy on Academic and Research Misconduct, please consult your instructor. Wilfrid Laurier University uses software that can check for plagiarism. Students may be required to submit their written work in electronic form and have it checked for plagiarism. Distribution and Access The administration of this course emphasizes electronic distribution of materials and electronic interaction among all participants. As a consequence, every student must have email and WWW access. Email addressed to jeid@wlu.ca, is answered by the instructor. All emails relating to class material must have EC655 question in the subject heading or else your email might not be answered. I will check my emails regularly, But I do not check my email over the weekend nor at night. All emails received after 6:00 pm will be answered the next day provided the next day is not a Saturday. In the latter case, your email will be answered on Monday. The course will also make heavy use of mylearningspace. Every student must have access to the course section on mylearningspace. Discussion board are opened to all and encouraged by the instructor, however the instructors participation is not guaranteed. From time to time, I will answer a general discussion question, but that is not the rule. If you need to ask me a question, you must email me at jeid@wlu.ca with a subject line that contains EC655 question. All access to online course materials can be accomplished through rst accessing the mylearningspace page and following the available links. All handouts, including assignments and their solutions will be available on mylearningspace. Students should become familiar with the structure of this material early in the semester. You can access mylearningspace at:

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https://mylearningspace.wlu.ca/ Homework Assignments There are 3 assignments for this class. Homework solutions will be available on mylearningspace at the end of the day it is due.These homework are meant to familiarize you with statistics and how to solve statistical problems using Stata. Some problem sets will be solely computational while others will also have a theoretical section. No homework assignment will be accepted after the end of the class the day it is due. If you have questions about the way an assignment was graded, you should consult the instructor. Each assignment is marked on a 100 point scale, an average over the six assignments is calculated and converted to a 20 point scale. Grading Policy Grading for the course is on a 100-point scale, with the points distributed as follows: Points Assignments 20 Posted Distribution S EPTEMBER O CTOBER N OVEMBER 22 20 17 Dates 3 Due O CTOBER N OVEMBER N OVEMBER 6 3 29

Proposal and Preliminary work

10

D EC 1

Test 1 Test 2 Final Exam

15 15 40

O CTOBER 13 N OVEMBER 10 Final Exam Period

No make up tests are given for any missed tests. No alternatives are given for missed homework, the student forgoes the full mark (receives a mark of zero) if assignments are not turned in on time. If

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and when a student misses a test, the nal mark will be reweighed and the portion of the mark that corresponds to the missed test will be allocated to the nal. There is no need for a Doctors notes in case a test is missed. There is also no need to inform the instructor of missed test, since that is obvious (your test is not handed in). However, students are strongly encouraged to sit all tests and exams, since there are no penalties for writing a test and not performing well. If a students performance on the nal exam is superior to that of any tests (this does not apply for assignments), the nal mark will be reweighed and the portion of the mark that corresponds to the test that had a relatively lower mark is allocated to the nal exam.

Proposal and Preliminary Think of this as your rst take on EC681. Here you will develop an idea, research it and propose it to me. Although this is due in December, I will be meeting with you individually throughout the semester to monitor your progress. These meetings will be monthly meetings, usually at the end of each month.

The allocation of marks above can be changed at the discretion of the instructor as of the time the instructor informs the students orally, and on mylearningspace
Tentative Course Schedule Lectures will be given on a tablet and turned into psdf format and distributed to class. Whenever necessary typed lectures will be available at https://mylearningspace.wlu.ca in the lecture folder the corresponding week. A. Review of Probability Theory Lecture Note 1: Probability and Distribution Lecture Note 2: Expectation and Moments Wooldridge, Appendices A and B Gary Burtless, Are Targeted Wage Subsidies Harmful? Evidence from a Wage Voucher Experiment, Industrial and Labor Relations Review 39 (October 1985), 105-111.

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B. Review of Statistical Inference -- Point and Interval Estimation; Hypothesis Testing Lecture Note 3: Sampling Distributions and Inference Lecture Note 4: Approximate [Asymptotic] Distribution of the Sample Mean Lecture Note 5: Condence Intervals Wooldridge, Appendix C S.A. Woodbury and R. Spiegelman, Bonuses to Workers and Employers to Reduce Unemployment: Randomized Trials in Illinois, American Economic Review 77[4], September 1987. MHE, Chapter 2. C. Regression I -- Why and How? Lecture Note 6: Bivariate Regression Lecture Note 7: Sampling Distribution of Regression Estimates Classical Theory Lecture Note 8: Sampling Distribution of Regression Estimates Asymptotic Theory Lecture Note 9: Residuals, Fitted Values, and Goodness of Fit Lecture Note 10: Introduction to Multivariate Regression Lecture Note 11: Multivariate Regression (cont.) Omitted Variables, Short vs. Long Wooldridge, Chapters 1-5 MHE, Sections 3.1 (through 3.1.3), 3.2 (through 3.2.2), and 3.4.3 D. Regression II -- Using Multivariate Regression Lecture Note 12: Using Multivariate Regression Wooldridge, Chapter 6-7 MHE, 3.1.4 A. Krueger, How Computers Have Changed the Wage Structure: Evidence from Micro Data, Quarterly Journal of Economics108[1], February 1993, 33-60. DiNardo, J. and J.S. Pischke, The Returns to Computer Use Revisited: Have Pencils Changed the Wage Structure Too?, The Quarterly Journal of Economics 112 [1], February 1997, 291-303.

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A. Krueger and S.B. Dale, Estimating the Payoff to Attending a More Selective College: An Application of Selection on Observables and Unobservables, The Quarterly Journal of Economics 117, November 2002, 1491-1529. Lecture Note 13: Differences-in-Differences and Natural Experiments Wooldridge, 13.2 MHE, Section 5.2 E. Inference Problems -- Heteroscedasticity and Serial Correlation Lecture Note 14: Heteroscedasticity, Linear Probability Models Lecture Note 15: Serial Correlation Wooldridge, Chapters 8 and 12 MHE, Section 3.4.1 F. Instrumental Variables Lecture Note 16: Instrumental Variables and Two-Stage Least Squares for Omitted-Variables Problems Wooldridge, Chapter 15. MHE, Sections 4.1 and 4.2 (through 4.2.1), Section 4.6.1 J. Angrist, Lifetime Earnings and the Vietnam Era Draft Lottery: Evidence from Social Security Administrative Records, American Economic Review 80[3], June 1990, 313-336. J. Angrist and A. Krueger, Does Compulsory School Attendance Affect Schooling and Earnings?, Quarterly Journal of Economics 106, November 1991. J. Angrist and W.E. Evans, Children and Their Parents Labor Supply: Evidence from Exogenous Variation in Family Size, American Economic Review 88, June 1998, 450-477. G. Simultaneous Equations Lecture Note 17: Simultaneous Equations Models -- Motivation and Identication Lecture Note 18: Simultaneous Equations Models -- Estimation Wooldridge, Chapter 16.

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J. Angrist, G. Imbens, K. Graddy, The Interpretation of Instrumental Variables Estimators in Simultaneous Equations Models with an Application to the Demand for Fish, Review of Economic Studies 67[3], July 2000, 499-257(29).

The actual lecture schedule might change from what is stated above

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