Tilburg University BSc Economics

30L203: Econometrics for ECO 30K208: Econometrics for EBE

Fall 2013 Prof.dr. Jaap Abbring TAs: Ali Palali MSc (a.palali@tilburguniversity.edu) Erdal Aydin MSc (e.aydin@tilburguniversity.edu)

Objective: Students who have successfully completed this course have a good grasp of basic techniques of empirical economics, including linear regression and instrumental variables estimation. They are able to apply these techniques using the software package Stata, in applied economic research leading to a term paper or a BSc thesis. They are well prepared to study more advanced topics in applied econometrics, such as the analysis of time series data and panel data and latent variable models. Description: This course provides an introduction to econometric methods, with a strong emphasis on the application of these methods in applied economic research. In the first half of the course, students first acquire a basic understanding of the nature of empirical research and the possibilities and limitations of econometric methods. Then, they study the basics of one of econometrics key tools, linear regression analysis of cross-sectional data. Along the way, students are introduced to the software package Stata and econometric methods are illustrated with empirical examples and empirical exercises. In the second half of the course, more advanced topics, including regression analysis with heteroskedastic and autocorrelated data, causal inference, instrumental variables estimation, and simultaneous equations models are studied. In addition, students are guided in writing a small research paper in empirical economics. Course load: 6 ECTS Prerequisites: Econometrics for ECO (30L203) requires Mathematics (30L103 & 30L108), Statistics (30L104), and Microeconomics (30L101 & 30L106); Econometrics for EBE (30K208) requires Mathematics (350896 & 30K106), Statistics (350011), and Microeconomics (33K102 & 30K105). Reading: We will use a single text book: Jeffrey Wooldridge (2013), Introductory Econometrics, International 5 edition, Cengage Learning th (you can also use the 4 edition of 2009).
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For Stata tutorials, please check http://www.stata.com/links/resources1.html. Schedule and outline: The course (6 ECTS) is taught in 13 weeks, with one 1h45m lecture and one 1h45m workshop session each week (except week 7; see below). The lectures present the core material. The workshop sessions teach students how to use the software package Stata for empirical work, deepen and expand the core material with empirical and other practical exercises and examples, and guide students in preparing their final research paper. Weeks 1-6: Introduction and basics of regression analysis The first six lectures cover the nature of econometrics and economic data (Chapter 1), the simple regression model (Chapter 2), multiple regression analysis: estimation (Chapter 3), multiple regression analysis: inference (Chapter 4), and a brief discussion of properties of the OLS estimator in large samples (optional reading: Chapter 5).

The workshop sessions in weeks 1,3, and 5 are computer lab sessions in which students work with Stata under guidance of the TA (optional reading: Stata tutorials). The remaining sessions are spent on regular exercises, examples, and questions on material covered in the lectures. A selection of topics from Chapters 6 and 7 (optional reading) is covered along the way. Week 7: Preparation for the empirical assignment After wrapping up any remaining material from weeks 16, the seventh lecture slot will be used by the TA to hand out, discuss, and prepare for the research paper assignment (optional reading: Chapter 19). There will be no workshop sessions in week 7. Weeks 8-13: Some advanced topics The last six lectures cover heteroskedasticity (Chapter 8), aspects of time series analysis and autocorrelated errors (parts of Chapters 10 and 12), instrumental variables, simultaneous equations, and causal analysis (Chapters 15 and 16). The workshop sessions in weeks 8,10, and 12 are further computer lab sessions. The remaining sessions are similar to those in the first half of the course, with an additional focus on the research paper assignment. Office hours: Students with questions and comments that cannot be covered during the lectures and workshop sessions should first contact the TA, by email or in person at times agreed in the tutorials. Grading: Students are expected to actively participate in all lectures and tutorials. The final grade is based on homework assignments (25%) and a final written exam (75%). The homework assignments include i. twelve small problem sets (Stata and other assignments) that need to completed and handed in individually; and ii. an empirical research paper of about 10 pages that should be written and handed in jointly with another student. The twelve weekly assignments are graded pass if there is evidence that students made a serious effort completing the assignment, and fail otherwise. Further details on the assignments, including deadlines, are given in the Tutorials document under Assignments on Blackboard. The grade for the homework assignments is determined by the grade for the research paper, with a discount for each weekly assignment failed: Students who fail five or more weekly assignments receive a grade of zero for their homework assignments (so that their final grade is 75% times their final written exam grade). Students who fail four or less weekly assignments receive a grade for their homework assignments equal to the grade for their research paper times (5 minus the number of weekly assignments failed)/5. For example, a student who passed 10 and failed 2 weekly assignments and received a grade 10 for her research paper will receive a grade (5-2)/5 x 10 = 6 for her homework assignments (which in turn contributes 25% to her final grade). The final exam is an open book exam. Students can bring (a copy of) Wooldridges book, any documents distributed during the course (slides, handouts, earlier exams, etcetera), their course notes (including annotations in the book, notes on the slides, etcetera), and a dictionary to the exam. They can also bring (any) calculator, but communication devices (including internet-enabled calculators) are not allowed. Resit policy: The final exam can be retaken once this academic year (for 75% of the grade). The homework assignments cannot be retaken during the year; the initial grade also contributes to the final grade for the resit (25%). Students who did not pass the course last (or in an earlier) year need to retake the entire course, including the final assignment, this year. Further instructions for students from earlier years are given in the Tutorials document under Assignments on Blackboard.