Research in Applied Economics An Introduction to the

Research in Applied Economics An Introduction to the Module 2006/7 IAN WALKER Module Leader 2005/6 S 2. 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 Ph. D 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 (Econ. Lit, 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, JPol. Econ, QJE, EJ, …. ) – Applied journals (Jo. Lab. Econ, Jo. Health. Econ …) – Survey journals (JEcon. Lit, JEcon. Persp, JEcon. Surv…. )

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 out http: //www 2. warwick. ac. uk/fac/soc/economics/ug/modules/3 rd/ec 331/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 i. Mac) – Slow is OK, 256 mb+ 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!