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

1. Research in Applied Economics An Introduction to the Module 2006/7 IAN WALKER Module Leader 2005/6 S2.109 i.walker@warwick.ac.uk

2. 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

3. 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

4. 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

5. 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

6. 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 necessarilyregression 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

7. 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

8. 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.

9. 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

10. 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

11. 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……..

12. 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

13. 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…. )

14. Ensure you have minimal IT literacy and presentational skills • Sign up for Warwick Skills Certificate modules • And work through Key Skills On-line

15. 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

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

17. 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

18. 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/

19. Summary • Youare 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!