ECON 171: Advanced Econometrics

University of California, Merced

Course Overview and Course Learning Objectives:

Econometrics is the application of statistical techniques to test economic theories,
estimate economic relationships, and evaluate policy using real world data. For example,
econometrics is the practice of using data to find answers to such questions as “Does an increase
in the minimum wage lead to higher levels of unemployment?”, “What is the monetary return in
income for an extra year of education?”, and “Does increasing access to credit increase
entrepreneurship?”
This course will focus on developing different techniques that are commonly used in
empirical research. This course assumes that students are familiar with the simple linear
regression and multiple regression analysis and will build on this foundation. Students will learn
how to analyze data, make informed conclusions, and critique the limitations and assumptions of
empirical analysis. The course will emphasize the application of econometrics, particularly
through the econometric software package STATA.

Course Learning Outcomes:

At the end of the course, students will:
• analyze and implement a variety of econometric techniques for conducting empirical
research using data.
• practice critical review of published research in applied economics.
• discern which techniques are most appropriate, by assessing their limitations and
assumptions, for making causal inferences for a given question and dataset.
• be able to implement these techniques using the econometric software package
STATA.

Program Learning Outcomes:

This course’s Goals and Learning Outcomes meet several of the 6 specific Economics
Program Learning outcomes as well as several of the 5 specific Management & Business
Economics Program Learning outcomes listed below. For a map of the specific PLOs
that this course satisfies, please refer to the Curriculum Maps:
1. ECONOMICS CLICK HERE
2. MANAGEMENT & BUSINESS ECONOMICS CLICK HERE
Economics’ Program Learning Outcomes:
1. Demonstrate an understanding of the role of organizations and institutions in a society,
the impact of organizations and institutions on the economic environment and outcomes,
and how incentives influence individual and organizational behavior and performance.
2. Recognize and describe how government actions affect economic performance and how
economic interests influence government decisions.
3. Design and conduct research that will inform managerial and policy decision-making,
including the collection, analysis, and interpretation of data using familiar software
packages.
 4. Define problems and identify multifaceted explanations for complex economic
phenomena by using information and data from multiple sources to answer the questions
at hand.
5. Demonstrate critical thinking about the information encountered, whether it is in
coursework or reported in the media.
6. Communicate clearly and cogently in written and oral form using modern technology.
Management and Business Economics’ Program Learning Outcomes:
1. Analyze key data and solve problems related to business management.
2. Apply theories and concepts from disciplines in Management and Business Economics
(e.g. accounting, economics, statistics, finance, and marketing) to business management
situations.
3. Use effective written and oral communication consistent with the discipline and
professional environments.
4. Apply information technology to develop business proposals, models, and reports, with
recommendations for economics and management strategies and actions.
5. Evaluate ethical, social and external issues as they relate to the organization, operations,
human resources and business ventures.

Course Prerequisite: ECON 110

Course Material:
There is no required textbook for the course. However, the textbook “Introductory
Econometrics, A Modern Approach” by Jeffrey M. Wooldridge is a very useful reference and
most of the lecture notes will be based on this book. There will be reading assignments
periodically for the course that do not come from the textbook. Class notes, assignments and
other important class materials will be posted in UCMCROPS. You are responsible for checking
it regularly for updates. The course will require students to the use of STATA, a statistical
package that can be used for both very simple and very complex applied work. STATA is
available on the Computer Labs KL 202, KL 208, SSM 102, SSM 152, SSM 154, and COB 281.

Course Requirements/Grading:
This class will meet two times a week. You are responsible for reading the assigned
material prior to attending lectures. Student performance will be assessed by homework
assignments (20%), two midterm exams (15% each), independent research project (15%), and a
comprehensive final exam (40%). You are allowed and encouraged to work in groups on the
homework assignments, but everyone has to submit his/her own work. There will be no make-
up exams and late homework assignments will not be accepted.

Tentative Course Outline:

Week Topic
1 (August 27) Probability, Simple Linear Regression
2 (September 1,3) Multiple Linear Regression
3 (September 8, 10)
4 (September 15, 17)
5 (September 22, 24)
6 (September 29, October 1)
7 (October 6, 8)
8 (October 13, 15)
9 (October 20, 22)
10 (October 27, 29)
11 (November 3, 5)
12 (November 10, 12)
13 (November 17, 19)
14 (November 24)
15 (December 1, 3)
16 (December 8, 10)
Experimental Designs and Randomized Controlled Trials
*Reading: Bertrand and Mullainathan, 2004
Instrumental Variables
Instrumental Variables
*Reading: Angrist and Krueger, 1991
Instrumental Variables
October 8: Midterm 1
Regression Analysis with Time Series Data
Introduction to Panel Data: Difference-in-Difference, Fixed
Effects, Random Effects
Introduction to Panel Data: Difference-in-Difference, Fixed
Effects, Random Effects
*Reading: Card and Krueger, 1993
Introduction to Panel Data: Difference-in-Difference, Fixed
Effects, Random Effects
Introduction to Panel Data: Difference-in-Difference, Fixed
Effects, Random Effects
*Reading: Ashenfelter and Krueger, 1994.
November 17: Midterm 2
Regression Discontinuity
Regression Discontinuity
Regression Discontinuity
*Reading: Lee, 2008

Readings:

Angrist, Joshua, and Alan Krueger. 1991. “Does Compulsory School Attendance Affect
Schooling and Earnings?” Quarterly Journal of Economics, 106 (4).

Ashenfelter, Orley, and Alan Krueger. 1994. “Estimates of the Economic Returns to sChooling
from a New Sample of Twins.” The American Economic Review, 84 (5): 1157 – 1173.

Bertrand, Marianne, and Sendhil Mullainathan. 2004. “Are Emily and Greg More Employable
Than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination.” American
Economic Review 94 (4): 991-1013.

Card, David, and Alan Krueger. 1993. “Minimum Wages and Employment: A Case Study of the
Fast Food Industry in New Jersey and Pennsylvania.” American Economic Review, 84 (4): 772 –
793.

Lee, David S. 2008. Randomized experiments from non-random selection in U.S. House
elections. Journal of Econometrics, 142: 675–97.