Research in Applied Economics An Introduction to the Module 2006/7

IAN WALKERModule Leader 2005/6

S2.109 i.walker@warwick.ac.uk

Idea behind the module• Economics gets everywhere

– and you have seen only a small fraction of it• This is your chance to dictate the content of your

studies• Gives you a chance to apply your new skills in

economic analysis• Allows the opportunity to develop analytical and

presentational skills– Shows that you have good non-cognitive skills

• Gives you a topic that you can talk about in depth and with enthusiasm– in interviews

Components of the module• Lectures in term 1

– To provide guidance on methods, data and software

• Library – “Information skills” support

• Classes in terms 1 & 2– To provide generic guidance within each topic area– To give individual feedback– To promote and monitor individual progress– No help after end of Term 2 – “tough love”

• Project (80% project - 20% preparatory work)– 5000 words– Deadline: start of term 3 in 2006/7

The RAE work programme• Check feasibility of idea (this summer)• Make initial presentation (about week 5)

– Get feedback and develop idea

• Present lit review (about week 9)– Decide on the big issues and your “angle”

• Data presentation (about week 12)– Demonstrate that useful data is accessible and you

understand it

• Final presentation (about week 18)– Fine tune during Easter vacation

Staff• Module leader and lecturer

– TBA

• Library staff– Help with textual databases and e-collections

• Tutors– Broad range of expertise in applied research– Active researchers in the field

• Often away, email for appointments

• Tech support (usually a PhD student doing applied research)– Guidance with getting data, using software, etc

What is an RAE project?• Your OWN work, and your OWN topic

– NOT an essay, NOT a survey

• Has to have some economic content– Not just an econometric/statistical exercise

• Has to have some value added– May even be original

• Not necessarily regression analysis– We strongly encourage diversity– “theory”, “simulation”, “policy evaluation”, “experiment”,

“meta-analysis”

• Emphasis is on evaluation– Other’s work, your own work, what you might have done

What do you have to do?• Think about what you might like to do – before Oct• Attend (about 18) lectures in term 1

– Source of ideas, stimulation, basic skills, and guidance– All notes available on RAE website

• Attend information skills sessions in term 1– Full-text (JSTOR etc), lit databases (EconLit, SSCI etc)

• Attend classes in terms 1 and 2– Make presentations

• Preliminary idea, Lit review, Data availability, Results/findings

• Write up project during Easter vacation– critically appraise lit, acquire data, use stats

packages/spreadsheets, evaluate your OWN work

Examples of recent topics• A “reciprocity” experiment in a restaurant

– Simple critique of important neoclassical economics idea

– No econometrics, simple “controlled” experiment• The effect of “winter fuel allowance” on fuel

expenditure– Microeconometric analysis exploiting “natural

experiments” in policy reforms– Test of “behavioual economics”

• Effect of cocaine prices on crime rates– Time series analysis– Elasticity, deadweight loss, cointegration etc.

More examples• How gas suppliers could use weather forecasts to

hedge risk– Clever application of financial futures model

• Economic determinants of sleep– Opportunity cost of time– Econometric analysis of UK Time Use Survey data

• Effects of Disability Discrimination Act– Simple labour economics– Analysis of wages of disabled workers in large and small

plants before and after policy enacted - difference-in differences

• How does wealth affect longevity– Analysis of large UK panel dataset

Yet more examples• The income elasticity of labour supply

– Diff-in-diffs exploiting the Child Tax Credit reform

– Looks at labour supply of mums before and after reform compared to non-mums

• Wages of immigrants– Simple econometric analysis of General

Household Survey data

• Gender effects in dictator games– Lab experiment on students

Fertile areas• Wage determination

– LFS data is large and available 93-03– Lots of ideas to focus on

• Education, discrimination, regions, disability, ethnicity, immigrants, language skills, BMI (in BHPS and some GHS)…..

– Lots of techniques to try• “quantile” regression, selectivity model, endogeneous “treatment”

• Expenditure patterns– FES (now called EFS) is large and available 78-03

• Very detailed data, income variation, relative price variation

– Possible angles• effect of a “fat tax”; effect of opening hours variation on alcohol

spending; purchases via internet; credit card use; regional differences; ethnic differences; child gender effects……..

More fertile areas• Welfare reform and policy evaluation

– Build a spreadsheet model to analyse some issue• Pension reform?

– Evaluation of some recent policy• Educational maintenance allowance?

• Transport economics– Elasticity of demand for petrol, travel to work, commuting

• Health economics– Effect of exercise on health, elasticity of supply of nurses,

effect of AIDS on growth, effect of prescription charges• Social issues

– “Social” capital (GHS 02), friendships (BHPS), happiness (BHPS), parenting (BHPS), neighbourhood renewal (ONS N’hood data), do step-children do worse, time use

What should you do – NOW ?• Identify your idea (or, at least, your general area)• Think about your area of interest:

– Monetary, Financial, IO, Labour, Public, Development ..– Health, Environment, Sport,, Culture, Transport ..

• Perhaps consult your Personal Tutor?• Identify the BIG issues in your topic

– The Economist, New Scientist, Cosmopolitan………• Think narrow, think deep• Browse the literature

– Big journals (AER, JPolEcon, QJE, EJ, ….)– Applied journals (JoLabEcon, JoHealthEcon …)– Survey journals (JEconLit, JEconPersp, JEconSurv…. )

Ensure you have minimal IT literacy and presentational skills• Sign up for

Warwick Skills Certificate modules

• And work through Key Skills On-line

Consult RAE website• Links to tutors• Advice on how to do well (and badly)• Data and software advice• Links to useful sources of info• ppt’s and pdf’s of all lectures

– ppt’s contain “live” (clickable) links– pdf’s are in “handout” format for economical printing– Updated week by week – Normally available a few days ahead of lectures

Check it outhttp://www2.warwick.ac.uk/fac/soc/economics/ug/modules/3rd/ec331/details/docs/

What you have to do early next term

• Sign up for an RAE tutor– Check website class times, tutor areas of expertise

• Ensure easy access to a PC (forget the iMac)– Slow is OK, 256mb+ is good if you use “micro” datasets– Broadband internet access is useful for downloading– Start practising “safe research” - lock it up, and back it up!

• Consider buying some econometrics software– PCGive, SPSS …….. EViews …. STATA

Helpful reading• Know some basic statistics/econometrics

– J.M. Wooldridge “Introductory Econometrics”– J. Stock and M. Watson “Introduction to

Econometrics”

• John Kay’s “The Truth about Markets”– http://www.thetruthaboutmarkets.com/

• Steve Levitt’s “Freakonomics”– http://www.freakonomics.com/

Summary• You are responsible for you own progress

– You CAN do very well– But you can choose to do very badly– The harder you work the more help your tutor will be

• If you want to do well - time management is very important– start TODAY!

• Data is generally much harder to get than you might imagine– Think about this as soon as possible

• God made this summer “vacation” for RAE work– Next summer is for Ibiza!