Reference no: EM132393306

Assignment -

Part I - Introduction and Literature Review

This part contains a total of four pages (excluding references, charts, and tables), and it must have two separate sections: 1) Introduction, and 2) Literature Review. Each section should be two (2) pages in length.

1. Introduction (two pages)

Prior to completing this section, read the following:

Mostly Harmless Econometrics, Chs. 1, 2 Dudenhefer, pp. 21-26.

Neugeboren and Jacobson, pp. 16-20, 39-43.

Wooldridge § 19.1.

Your introduction should lay the foundation for your research project. Prior to writing, select your research topic. Your research topic should be a question that is interesting to you and that is relevant to economic agents (e.g., consumers, firms, governments), overall society, public policy, and/or economics in general.

Make sure to describe the goal of your research study. Address the following questions: What is the purpose of your study? How are you planning to address your question? What kinds of data will you need to answer your question? How are you planning to use these data to address your research question? What public policy recommendations do you envision providing to policymakers based on your research findings?

Finally, justify why your research topic is an important one. For example, envision submitting your research topic to a governmental agency for research funding, in which you could address the following questions: Why is research necessary on this topic? How will it help policymakers develop good policies or change existing policies based on the outcomes of this research? How will this research contribute to the growth of scientific knowledge?

As you complete this section, make sure that you describe your research topic, concepts, and questions in terms of economic language. In other words, think and write like an economist by using the tools and terminology that you already learned in past economics courses.

2. Literature Review (two pages)

Prior to completing this section, read the following:

Dudenhefer, pp. 32-33, 55-58.

Neugeboren and Jacobson, pp. 22-23, 47-48.

Wooldridge, §19.2.

You must provide a literature review of the economic concepts relevant to the research topic you identified above. This literature review will help you conceptualize and operationalize your research question. It must be comprised of at least three (3) articles from scholarly, reputable economics journals. Most students will rely upon more than three sources. Previous literature on your topic can be found using academic journals' electronic portals such as:

• EconLit
• JStor
• Journal of Economic Perspectives
• Journal of Economic Literature
• Handbooks in Economics
• New Palgrave Dictionary of Economics

Your sources must be reputable. "Reputable" scholarly journals are peer-reviewed and widely cited by the academic community. If you are uncertain whether one of your articles is found in a reputable scholarly journal, consider searching for the journal in an online list of economics journal rankings, for instance, the IDEAS/RePEc Simple Impact Factor for Economics Journals. Obviously, you should never rely upon an article found in a "predatory journal," which is a journal that publishes papers for a hefty fee and without peer review. An article in Science provides a list of open-access journals that were successfully spoofed by a researcher, suggesting these journals are possibly not reputable and perhaps predatory in nature.

Please note that media outlets such as The Wall Street Journal, Bloomberg News, The Economist, and the like are not considered reputable scholarly journals and will not be accepted as part of your literature review. Of course, feel free to use such informal sources to motivate your topic to the reader; however, note that such sources will not count towards the minimum of at least three articles from reputable scholarly journals.

Additionally, your sources should be relatively recent. This means that your sources should not have become intellectually obsolete. For instance, an article from 1975 that was later convincingly contradicted by articles from the 1990s would not be considered "relatively recent."

For each of the reputable scholarly sources you select for your literature review, you should provide a brief and to-the-point summary of the article, and describe how the source will help with your research topic. For example, suppose you are performing research on the determinants of crime, and you found an article by Isaac Ehrlich that is relevant to your research topic. This article could then be potentially incorporated into your literature review.

You must then cite this article in your bibliography (a separate page at the end of your paper):

Ehrlich, Isaac. 1996. "Crime, Punishment, and the Market for Offenses." Journal of Economic Perspectives. 10(1). Pp. 43-67.

Part II - Data

This part has only one section-Data-and it should cover a total of two (2) pages (excluding references, charts, and tables).

1. Data (two pages)

Prior to completing this section, read the following:

Dudenhefer, pp. 26-30, 35-46, 53-55, 62-64.

Neugeboren and Jacobson, pp. 11-15, 23-29, 44-46. Wooldridge § 19.3.

First, provide an overview of the data that you will be using to conduct your econometric study. Questions that you should potentially address are:

• What are your data?
• What type of data are they (e.g., cross-section, pooled cross-section, panel, time series)?
• What are the sources of your data?
• How did the data provider collect these data (e.g., random sampling, stratified sampling, survey)?
• What is the "unit of observation" in the data? For example, if you are studying the relationship between crime and punishment at the city level, and you have data on the crime rate and punishment rate for many different cities across the U.S., then your unit of observation is "city." If you have a panel of these data collected annually, then your unit of observation is city-year.
• What are the strengths and weaknesses of your data? How do your data differ from the data used in previous research on your topic (e.g., more observations, new sources, "cleaner" datasets, etc.)? Are there any features of your data that may affect your results (e.g., selection bias, measurement error)? How will these strengths and weaknesses affect your ability to successfully address your research question?

Next, you must prepare a table of descriptive statistics and describe its contents to the reader. A table of descriptive statistics includes the sample size, in addition to the mean and standard deviation for all quantitative data. For categorical data, only report the percentage of the observations in each group. See the penultimate page of the Wooldridge article in Blackboard for a template of a table of descriptive statistics. Please note that you may find it advantageous to prepare a table of shorthand variable descriptions as well.

Then, briefly discuss stylized facts about your key variables. You should strongly consider visual descriptions of data: histograms, scatter plots, and/or a table of correlations.

Part III - Empirical Analysis

This part should have four (4) pages (excluding references, charts, and tables), and it must have two separate sections: 1) Econometric Model, and 2) Results.

Prior to completing this section, read the following:

Mostly Harmless Econometrics, the chapter on which you rely for your model Dudenhefer, pp. 26-30, 35-46, 53-55, 62-64.

Neugeboren and Jacobson, pp. 11-15, 23-29, 44-46. Wooldridge §§ 19.4, 19.5.

1. Econometric Model (two pages)

Your econometric model should be constructed in a manner that adequately tests the underlying theory. There are two important components here-the hypothesis to be tested and your identification strategy. Generally speaking, "identification strategy" refers to the approach one utilizes to estimate the causal effect of a change in "something" on "something else." Your identification strategy consists of the assumptions you need to make in order to ensure that your parameters are causal in nature.

Consider your hypothesis to be tested. At this stage, you should have already established a key dependent variable and some key independent variables that affect the dependent variable. For instance, if you are studying the determinants of crime rate in cities, then your dependent variable may be potentially defined as the "number of crimes per 10,000 residents" in cities (i.e., the "crime rate"), and your independent variable may contain, among others, "spending per capita on police officers," "income per capita," "median age of the population," and "unemployment rate" in cities.

Your research topic from Part I may postulate, for instance, that a particular independent variable, say, "spending per capita on police officers," has a causal impact on the "crime rate."

You must also state how your hypothesis fits into the existing literature that you discussed in Part I. Additionally, you should clearly describe how your hypothesis is novel in the sense that previous researchers have not yet analyzed it.

Please note that if the relationship between "spending per capita on police officers" and "crime rate" has already been studied within a particular context, it does not mean that you cannot study this relation within a different context.

After you have adequately described your hypothesis to be tested, you must specify the econometric model that you will use to test your hypothesis. This may be accomplished by providing the following:

Describe and write down the econometric equations you will use to test your hypothesis.

Describe the estimation method you will use to test your hypothesis. Remember that you usually want to infer causation, so your identification strategy is extremely important. There are a number of different estimation methods at your disposal, including:

• OLS regression,
• One-way or two-way fixed effects regression,
• Differences-in-differences (diff-in-diff) or even differences-in-differences-indifferences (diff-in-diff-in-diff),
• Regression discontinuity design, and o Instrumental variables (IV) approach, among others.

These estimation methods are described in detail in Mostly Harmless Econometrics. You will most likely find that OLS will not be suitable for your research project. As a result, describe intuitively why you are not using OLS and why you have chosen a different estimation method in its place.

• Are you applying any transformations (e.g., taking logs) to any of your variables? Are you using a quadratic specification for any terms?
• Why is your specification appropriate? You should be able to assert that changes in your variables of interest are causing the dependent variable to change. What econometric issues have you encountered, e.g., omitted variable bias, simultaneity bias? How did you tackle these issues? Can you speculate on the direction and sign of the bias? In other words, is it likely that your current estimates have a downward or an upward bias?
• Do your estimates suffer from high but imperfect multicollinearity? To answer this question, you may want to reference the variance inflation factors of your estimates.
• In order to perform statistical inference, are your standard errors homoscedastic? Or do you need to ensure that they are heteroskedastic consistent?

2. Results (two pages)

Now, display and discuss your empirical findings. You must properly interpret estimates and their corresponding p-values (hence, direction and statistical significance). Do they provide evidence to support your hypothesis? Why or why not? Do they support economic theory? Are your results of practical relevance? You should also describe the goodness-of-fit of your model. Please note that you will not lose points if your results do not support your hypothesis.

You should also include robustness checks. A robustness check involves using different reasonable assumptions as part of your empirical model. Its purpose is to ensure that your empirical results are plausible and valid, and that they are not a reflection of the manner in which you manipulated your data and/or implemented your model. Accordingly, you will likely find yourself with multiple specifications. It is highly recommended that you display your estimates from different specifications in a side-by-side manner in one table.

Finally, how do your empirical results compare to findings from the existing literature? And, equally important, what are the policy implications of your empirical results? What types of policy recommendations can you provide to policymakers based on your findings?

Part IV - Putting it all Together

Write a short sixth section-conclusion. The conclusion should succinctly summarize your research paper and perhaps allude to future research on your topic. Integrate all parts into a complete, fluent, and well-constructed applied econometric research paper. All useful feedback that you previously received should be incorporated, and each part should be reconsidered in terms of the "overall" final paper. In this final part you should include any additional edits, modifications, and improvements that you deem to be appropriate. Please do not simply incorporate the comments that you received from me. This is your paper, and therefore, in addition to my comments you should be able to improve your paper using your own insights and ideas.

The final paper should contain six (6) sections consistent with the aforementioned:

1. Introduction

2. Literature Review

3. Data

4. Econometric Model

5. Results

6. Conclusion

Please use section headings in order to improve the presentation of the paper. As is true with all parts of the individual research project, the final paper must be free of spelling mistakes and/or grammatical errors. The final paper is due the last day of class, and there will be no class presentation for the final paper.

Attachment:- Assignment File.rar