Advance Quantitative Methods
W 1:10 to 3:50pm
Instructor:
Fall 2011
CSB112
Professor William M. Rodgers III
wrodgers@rci.rutgers.edu
Office Hours:
Instructor:
Tuesday, 1:00pm to 2:00pm
Friday, 10:30am to 11:30am
By Appointment
Overview
The purpose of the course is to understand a variety of advanced econometric theories and apply
them to estimate the impact of policies and laws. The course’s capstone experience will be the
completion of a “peer review” style research paper on a question of interest to the student.
After completing the course, students will have answers to the following questions:

What tools do social scientists use to distinguish between correlation and causality?

How are law and policy changes used to estimate causal empirical relations?

What are the benefits of using panel (pooled cross section and time series) data?

How does measurement error impact the quality of one’s estimates? How do we
minimize its adverse impact?

How do researchers estimate models where the dependent variables are discrete
outcomes, such as employment or duration of unemployment?
These and other questions are the focus of this course which introduces students to advanced
quantitative methods used in policy analysis. Events such as natural disasters, law changes, and
regional variation have become popular ways to assess whether a policy has a causal impact on
an outcome.
Textbooks
*Peter Kennedy, Guide to Econometrics, 6th Edition, The MIT Press, Cambridge, MA, 2003.
*William H. Greene, Econometric Analysis, 6th Edition, Prentice Hall, Upper Saddle River, NJ,
2007
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Grading, Communication and Academic Integrity Policies
Four Problem Sets (40%)
Throughout the semester, we will have problem sets. The exercises will consist of answering
theory, empirical, and computer-based questions, which you are encouraged to complete with
your classmates (still submit your own original copy). The purpose of the exercises is to make
sure that students are learning the underlying theory presented in the lectures and are able to
utilize STATA to apply the knowledge.
Midterm Exam (20%)
In class exam that covers the theoretical and empirical work covered in the first half of the
semester.
Empirical Paper (40%)
Students will construct a journal style 20-25 page (this does not include tables and charts)
empirical paper that performs a descriptive analysis of a planning, policy or public health
question, or evaluates a public policy or program.
These manuscripts can serve as dissertation chapters or writing samples that can be used during
job searches. I will work with students that want to revise them for conference presentation and
publication in a peer-reviewed journal.
Due Dates:
9/14
1-Page Proposal Due
(Provide motivation, 2-3 questions/hypotheses, data, and methods)
9/15-10/4
Meet 1 to 2 times with Rodgers to discuss proposal
(Refine question(s), identify data, and method of analysis)
10/5
Annotated bibliography and revised hypotheses/method/data
10/19
In class midterm
Oct. to Nov.
Perform empirical analysis
Dec.
Writing the manuscript
12/23
20-25 Page Empirical Paper
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Communication:
All readings, course updates and other announcements will be posted on the course website. You
should have received an e-mail with a password and instructions on how to login to the course
website. If you've not, this is most likely due to the fact that you are either not using your
Rutgers assigned e-mail or registered for the course.
Integrity Policies:
Academic and intellectual integrity is not only at the center of the policymaking process, but are
also values of the Bloustein and Rutgers communities. Because of this, we will hold all students
to the following standards:
o Prompt arrival at all course sessions and meetings (random attendance will be taken)
o Attendance, participation, and respectful behavior in all sessions
o No use of cell phones and instant messaging during lectures, discussion groups, quizzes
and exams
Statement on Academic Honesty:
All members of our community must be confident that each person’s work has been responsibly
and honorably acquired, developed, and presented. Any effort to gain an advantage not given to
all students is dishonest whether or not the effort is successful. We view a violation of academic
honesty as a breech of trust, and will result in a “Fail” in this class, as well as possible
suspension or expulsion from the institution. When in doubt about plagiarism, paraphrasing,
quoting, or collaboration, consult the course instructors.
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Organization of the Course and Tentative Class Schedule
Week 1
Review of Classical Regression Model (Single Variable Case)
Application: Expenditure-Income Relationship
Week 2
Matrix Algebra-The Basics
Three Paper Ideas Due (1 Page)
Week 3
Review of Classical Regression Model (Multiple Variable Case)
Application: The Earnings Equation
Meet in EJBB Computer Lab (9/21)
Week 4
Establishing Causality: Instrumental Variables and Two Stage Least Squares
Application: Impact of Vietnam Service on civilian earnings
Problem Set #1 Due
Week 5
Establishing Causality: Natural Experiments
Application: Mariel Boat Lift
Annotated Literature Review Table Due
Week 6
Establishing Causality: Matched Pair Analysis
Application: Job Training
Week 7
Errors-in-variables
Application: Economic Returns to Schooling
Meet in Computer Lab (10/19)
Week 8
Mid-Term Exam (October 26th)
Problem Set #2 Due
Week 9
Sample Selection: Endogenous Right-hand Side Variables
Application:
Meet in Computer Lab (11/2)
Week 10
Sample Selection: Truncation and Censored Data
Application: TBD
Problem Set #3 Due
Week 11
Pooled Cross Section and Time Series Models
Application: Economic Growth Models
Week 12
Pooled Cross Section and Time Series Models cont.
Application: National Longitudinal Survey of Youth
Week 13
Duration Models
Application: Unemployment Duration
Week 14
Macro Variables in a Micro Equation
Application: Wage Curve Analysis
Meet in Computer Lab (12/7)
4
12/14/11
Problem Set #4 Due
12/23/11
20-25 Page Empirical Paper Due
5
I.
Introduction
Review of Classical Regression Model (Single Variable Case)
Text: Consult your previous methods books and Greene, p. 238
Application: Expenditure-Income Relationship
Computer Note #1: Analysis of Consumer Expenditure Data
“The Pitfalls of Using a Child Support Schedule Based on Outdated Data,” Family Economics
and Nutrition Review, 16:2, 2004 (with Yana V. Rodgers) (Published in 2005).
2.
Matrix Algebra-The Basics
Text: Greene, Chapter 2
Computer Note #2: Solving for the Least Squares Estimator
3.
Review of Classical Regression Model (Multiple Variable Case)
Text: Greene, Chapter 6
Application: The Earnings Equation and Decompositions
Computer Note #3: Estimating the returns to schooling and experience, and decomposing racial
and gender earnings gaps
Maxwell, Nan L. 1994. "The Effect on Black-White Wage Differences of Differences in the
Quantity and Quality of Education." Industrial and Labor Relations Review, Vol. 47, No. 2
(January), pp. 249-64.
Neal, Derek A., and William R. Johnson. 1996. "The Role of Premarket Factors in Black-White
Wage Differences." Journal of Political Economy, Vol. 104, No. 5 (October), pp. 869-95.
Rodgers, Yana van der Meulen, “A Primer on Wage Gap Decompositions in the Analysis of
Labor Market Discrimination,” in Handbook on the Economics of Discrimination, Edited by
William M. Rodgers III, Edgar Elgar Publishers: Northampton, MA, 2006.
4.
Establishing Causality: Instrumental Variables and Two Stage Least Squares
Text: Greene, Chapter 16
Application: Impact of Schooling on Earnings
Computer Note #4: Analysis of Census Data
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Angrist, Joshua D. and Krueger, Alan B. “Does Compulsory School Attendance Affect
Schooling and Earnings,” Quarterly Journal of Economics, November 2001, v. 106:4, pp. 9791014.
Angrist, Joshua D. and Krueger, Alan B. “Instrumental Variables and the Search for
Identification: From Supply and Demand to Natural Experiments,” Journal of Economic
Perspectives, Fall 2001, v. 15, pp. 69-85.
5.
Establishing Causality: Natural Experiments
Text: Class Notes
Application: Impact of the 9-11 Attacks and London Bombings on the Employment and
Earnings of U.S. and U.K. Muslims.
Computer Note #5: TBD
Angrist and Krueger (2001).
“Post-9/11 U.S. “Muslim” Labor Markets Outcomes,” July 2010. IZA Discussion Paper #4411.
(With Faisal Rabby). (Forthcoming Atlantic Economic Journal).
“The Impact of 9-11 and the London Bombings on the Employment and Earnings of U.K.
Muslims,” August 2010. IZA Discussion Paper #4763. (with Faisal Rabby). (Submitted to
Industrial Relations.)
Card, David. “The Impact of the Mariel Boatlift on the Miami Labor Market,” Industrial and
Labor Relations Review, January 1990, v. 43, iss. 2, pp. 245-57.
Zimmerman, David J., “Peer Effects in Academic Outcomes: Evidence from a Natural
Experiment,” February 2003, Vol. 85, No. 1, Pages 9-23.
Card, David and Alan B. Krueger. Minimum Wages and Employment: A Case Study of the FastFood Industry in New Jersey and Pennsylvania. American Economic Review. Vol. 84 (4). p 77293. September 1994.
6.
Establishing Causality: Matched Pair Analysis
Text: TBD
Application: Job Training
Computer Note #6: Analysis of NLSY job training data
7.
Errors-in-variables and Proxy Variables
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Text: Greene, Chapter 9, pp. 435 to 446
Application: Economic Returns to Schooling
Computer Note #6:
8.
Sample Selection: Endogenous Right-hand Side Variables
Text: Greene, Chapter 16.5, pp. 735 - 750
Application: Geographic Mobility
Computer Note #7:
*Borjas, George J. “Self-Selection and the Earnings of Immigrants,” American Economic Review
77 (September 1987): 531-553.
Chiswick, Barry R. “The Effect of Americanization on the Earnings of Foreign-Born Men,”
Journal of Political Economy 86 (October 1978): 897-921.
9.
Sample Selection: Truncation and Censored Data
Text: Greene, Chapter 20.2, pp. 949 - 983
Application: Labor Supply (wage and hours equations)
Computer Note #8: Analysis of Current Population Survey
10.
Pooled Cross Section and Time Series Models
Text: Greene: Chapter 14, pp. 612 – 641
Application: Penn World Tables and Economic Growth Models
Barro and Sali-Martin
Application: National Longitudinal Survey of Youth (NLSY)
“The Male Marital Wage Differential: Race, Ability, and Training,” Economic Inquiry, 48:3, July 2010,
(with Leslie S. Stratton).
Computer Note #9: Analysis of the NLSY
11.
Duration Models
Text: Greene, Chapter 20, pp. 984 - 997
8
Application: Unemployment Duration
Computer Note #10: Analysis of the CPS Dislocated Worker Survey
12.
Macro Variables in a Micro Equation
Text: Greene, Chapter 12
Application: Wage Curve Analysis
Blanchflower, David
Mundlak, Yari
Hines, James R. Jr., Hilary W. Hoynes and Alan B. Krueger, “Another Look at Whether a Rising
Tide Lifts All Boats” in Roaring Nineties: Can Full Employment Be Sustained?, edited by Alan
B. Krueger and Robert Solow, The Russell Sage Foundation and The Century Foundation Press:
New York, 2001: 493-537.
Freeman, Richard B. and William M. Rodgers III, “Area Economic Conditions and the Labor
Market Outcomes of Young Men in the 1990s Expansion,” in Prosperity for All: The Economic
Boom and African Americans, edited by William M. Rodgers and Robert Cherry, The Russell
Sage Foundation and The Century Foundation Press: New York, 2001: 50-87.
Computer Note #10: Merging BLS local area unemployment rate to micro wage data
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Advanced Quantitative Methods
W. Rodgers
Fall Semester 2011
Name____________________________________
Background Information
1.
In what degree program are you enrolled? ______________
2.
How far along are you in the program?_________________
3.
Why did you enroll in this course?
4.
What are your goals for the semester?
5.
Describe the type of math courses that you have taken?
6.
In what areas of labor market policy are you most interested? Why?
7.
Describe the type of statistics and econometrics courses that you have taken?
8.
Is there anything about you that I should know? (e.g., potential conflicts)
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Advanced Quantitative Methods
W. Rodgers
Fall Semester 2011
Developing Your Research Prospectus
What is our goal for this research paper assignment?
1. Develop an original piece of research that utilizes existing data (e.g., CPS) or creates
a data set and does one of the following:
a. Provides the empirical analysis to help inform a policy discussion
Trends and causes in recent wage inequality growth
Impact of recession on different demographic groups
b. Estimates the impact of a law or program
Impact of $787 billion ARRA funds on employment
Effect of minimum wage increase on hunger
How do you find a topic?
1. Class lectures and syllabi
a.
Professor alludes to unresolved issue
b.
Outdated study- need to update
2. Newspaper articles
a.
Chapter of my dissertation came from seeing an article in the Boston
Globe
3. Journal articles
a.
Update past study on syllabus
b.
Read Literature Reviews (JEL and Journal of Economic Perspectives)
Building literature review (finding related studies):
1.
2.
3.
4.
JSTOR and EconLit (Internet)
Google Scholar
References in papers on syllabus
References in studies that you read
What should your 250 word proposal contain?
The prospectus should contain a question (actually narrower the better), a motivation for the
question, brief summary of literature to date (what we know and don’t know about the question),
potential methods, and data to be used.
**I am happy for students to link their projects in other courses to this course. However, there
needs to be a feature that distinguishes the projects from one another.**
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