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01/04/2012

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Empirical Tools (ch 3)The fundamental issue faced by those doing empirical work in economics is
disentangling causalityfrom correlation
.
A. Randomized Trials (Measuring Causation with Data We¶d Like to Have)
A
randomized trial
is the ____________ type of experiment for testing causality.A group of individuals is randomly divided into two groups:1. ______________________________ who receives the treatment of interest2. ______________________________ which does not
Bias
refers to any source of difference between the groups that is _________________________ with the treatment but is not due to the treatment.The reason that randomized trials are the ³gold standard´ for empirically testing causal effectsis___________________________________________________.
Problems:

B
. Observational Data (Estimating Causation with Data We Actually Get)

O
bservational data
refers to data that is generated by _____________________________ observed inthe ___________________________, not in the context of a designed experiment.1.
Time Series Analysis
documents the _____________________________ between the variables of interest over time.
Problems:
Time Series analysis is
useful
if there are ____________________________ in the timeseries that are not related to other factors that can cause _________.2.
Cross-Sectional Regression Analysis
is a method for assessing the ________________________  between two variables while holding other factors ________________________.- a
cross section
means comparing many observations at __________________________ rather than outcomes ___________________________.
Regression analysis
describes the relationship between the variable you would like to explain (the __________________ variable) and the set of variables that you think might do the explaining (the __________________ variables).