Steven J. Davis and Erik Hurst 38001: Empirical Macroeconomics – Micro Data for Macro Models Fall 2011/Winter 2012 Course Schedule The course is a 15-week course comprised of the entire fall quarter and first half of the winter quarter. The course is being co-taught by Steve Davis and Erik Hurst. Erik will teach the first 7 lectures (lectures 1-7) and will focus on using household level data to address various questions of interest to macro economists. Steve will teach the last 7 lectures (lectures 9-15) and will focus on using firm level data to address various questions of interest to macro economists. Lecture 8 will be a guest lecture by ChangTai Hsieh who will talk about his work using micro data to assess cross-country differences in productivity. Fall Quarter Meeting Times Lecture: TA Session: Tuesday, 5:15-8:15: Room C10 of Harper Center (Business School) Friday, 1:00 - 2:30: Room 3B of Harper Center Winter Quarter Meeting Times Lecture: TA Session: Wednesday, 5:15 - 8:15: Room C10 of Harper Center (Business School) Friday, 1:00 - 2:30: Steve Davis Information Office: Email: Office Hours: 533 Harper Center steve.davis@ChicagoBooth.edu By Appointment Erik Hurst Information Office: Email: Office Hours: 410 Harper Center erik.hurst@ChicagoBooth.edu By Appointment Sebastian Sotelo (T.A.) Information Email: Office Hours: sotelo@uchicago.edu By Appointment 1 Overview of Course The goals for this course are the following: (i) Introduce students to a variety of data sources that can be used to test, calibrate and develop models of interest for macroeconomics and related fields. (ii) Introduce students to important papers and research questions with high empirical content and relevant to macroeconomics, broadly defined. (iii) Get students to think hard about the genesis of research questions and the inputs into successful research. Course Requirements There is a lot of work in this course. Hopefully, all of it will be beneficial with respect to sharpening your research skills. Aside from attending class, doing the course readings, and participating in lectures, you will have three additional requirements: handing in homework assignments (data work, referee reports, quantitative exercises), evaluating and extending two existing empirical papers, and writing an original “virtual” paper. Below, we discuss these requirements. Note: Auditors are expected to complete some components of the weekly assignments (those relevant to class discussion). (1a) “Data” homework assignments (3 out of 15 weeks). All assignments should be done individually. Students will be required to use various micro data sets to compute statistics of interest and explore empirical questions. These assignments are designed to familiarize students with important micro data sets, to gain familiarity with statistical tools and software packages for analyzing micro data sets, and to help stimulate thinking about potential dissertation topics. Two of these homework assignments will be done during Erik's portion of the class and one will be done during Steve's portion of the class. More information on these homework assignments will be posted on Erik's and Steve's websites as the course progresses. Erik's data homework assignments will be due to Sebastian on 10/12 (assignment 1) and 11/2 (assignment 2). 2 (1b). "Referee Report" homework assignments (2 or 3 times out of 15 weeks) Students will be required to hand in two page “referee reports” (max) on assigned papers. Students will be required to critically assess selected papers and then be prepared to discuss both the achievements and potential limitations of the papers in class. The goal of these assignments is to get students to start critically assessing existing empirical research. Students should be prepared to discuss their report in the TA sessions. These homework assignments will be due on occasion during the term. Erik plans to assign two papers early in the term. The reports on these two papers will be due to Sebastian on 10/26 (with Sebastian discussing the reports in the TA session on 10/28). (1c). Quantitative model simulation homework assignment (1 out of 15 weeks) Students will be required to engage in a quantitative model simulation exercise using models discussed in class. This assignment will be due during Steve’s portion of the class. Steve will post more information as his portion of the class starts. Note: All questions on the homework should be directed to the T.A. (not Steve and Erik). We will handle questions on the paper requirements below. (2) Paper extension Students will be required to take two existing papers (one during Erik’s portion and one during Steve’s portion) and to either (1) explore the robustness of the paper’s results or (2) extend the papers results in some meaningful way. Erik and Steve will each choose a set of papers from which students can choose. Students will be required to hand in a 8-12 page write up (plus tables and figures) doing some or all of the following (depending on the instructions from Steve and Erik): (1) Briefly summarizing the paper’s main results (2) Discuss how you are going to extend the paper’s results or explore the paper’s robustness. (3) Discuss why such extensions or robustness exercises are interesting (4) Summarize your finding (5) Discuss what you have learned from your extensions/robustness exercises Dates associated with the paper extension: Erik and Steve will post the papers that you can choose from for your extension during the second week of their respective portions of the course. Your replications will be due to Sebastian the day after Erik and Steve’s last lecture, respectively. 3 (3) Writing an original “virtual empirical paper”. This will be your main project for the course. It is a virtual paper in that you do not have to completely finish the paper – but you should make significant progress on it. Students will be required to pick an original research idea and then develop how you would set out to confront this idea. Your paper should take the following form: Introduction: What is the question and why is the question of interest? Literature Review: How does your paper fit into the broader literature? Theoretical Motivation: This could be actual theory or just a sketch of the relevant theory that underlies your question. Data: What data would you use to answer/address this question? Why are the data be well suited to the question? Empirical Methodology: How would you use the data to answer your question? Remember to keep in mind the concepts of identification and causality along with the idea that the same set of empirical facts can often support many theories. Depending on the nature of your question and the ease of accessing and using the data, we may ask you to make significant progress in the actual implementation of your proposed empirical work. Falsification Tests: What other specifications, tests and investigations could either bolster or cast doubt upon the primary tests of your hypotheses. Preliminary Results: The extent of the results provided will differ across students based on the project. Steve and Erik will provide feedback throughout the quarters to guide students as to our expectations for their specific paper. Dates associated with the virtual paper. Provide a two-page write up to Erik and Steve about your proposed research idea by 10/12. Meet with Erik and Steve together to get feedback on your preliminary idea during the week of 10/18. We may require a second meeting a week later if we ask for sufficient changes. Provide a 10-15 page write up to Steve and Erik by 12/2. A version of students’ slides to be used for their presentation the following week will also be due to Steve and Erik on 12/2. Steve and Erik will give feedback on the presentation to each of you on 12/5. 4 Present an overview of your paper (15 minutes) to the class during the week of 12/5. We will meet on Tuesday 12/6 and Wednesday 12/7 for presentations. Note, we will have two meetings during that week (finals week). Meet with Steve and Erik on 12/8 and 12/9 to get feedback on the paper and to get our expectations for what needs to be done by the paper's final submission during the end of January. NOTE: Please plan to be in town through the presentations and discussions (do not leave town prior to 12/9). Some of you may be required to submit an intermediate version of the paper on 1/6 if sufficient progress was not made on your first preliminary draft. This will come out of the discussions with Erik and Steve on 12/8 and 12/9. A complete version of the paper is due to Steve and Erik on 1/26. A final presentation of the paper is due to the class (15 minutes) during the last week of class. Steve and Erik will schedule these during early January. Again, a version of students’ slides will be due to Steve and Erik three days before the first class presentation. Steve and Erik will provide feedback on the presentation slides before the presentations. Course Grading 50% of the course grade will be on the virtual paper (both paper and presentation) 25% of the course grade will be on the weekly assignments. 25% of the course grade will be on the paper replication. We will provide letter grades when grading the virtual paper (both components) and the paper extension. These will be based both on effort, originality/insight, and execution. We will provide √+, √, √-, 0 for the homework assignments (each component separately). These grades will be based solely on effort. Reading Lists/Topics Erik and Steve will provide separate reading lists for their portions of the course. web pages for more information. See their respective TA Lectures Steve and Erik will post a list of the TA lecture dates and topics on their web pages. We will not meet during all TA sessions. Erik and Steve will attend these sessions when they are in town. 5 Prelim Requirements If you are taking a prelim in the empirical macro sequence (the sequence which this course is a part of), you need to submit a complete paper (not a virtual paper) to Steve and Erik the week before the scheduled prelim. Steve and Erik will not be submitting questions to the prelim. In lieu of that, you need to submit a completed paper to us prior to the prelim. If we are satisfied with the paper, you will pass our portion of the prelim. We will give you feedback throughout the process of how your virtual paper needs to be extended in order to pass our portion of the prelim. This will differ on a case-by-case basis depending on the paper topic. The key is that substantial work will need to be done above and beyond what will be submitted as your virtual paper. A few things: a. There still will be a prelim in empirical macro based on the material in the other parts of the sequence (the part by Harald, John Cochrane, etc.). b. If you think there is a chance that you are going to take the prelim in empirical macro, you will need to meet with Steve and Erik in late February to let us know of your potential intentions. If you do not meet with us at that time, the default is we are not going to pass you for the empirical macro prelim. As a result, we want to encourage all of you who are considering taking the empirical macro prelim to meet with us in late February. This does not commit you to talking it. It does, however, commit you to not taking it if you do not meet with us. c. At that time, we will tell you what you would need to do to your paper for us to sign off on you passing our portion of the prelim. d. In addition, we would be expecting you to meet with us again in late April and again in early June to update us on your progress. In summary, if you are taking the prelim exam in empirical macro, you need to submit a polished paper to us in order to pass our portion of the prelim. That paper has to be something of high enough quality that it makes a significant advance over what was submitted as your virtual paper. 6 TA Sessions During First Quarter September 30th: Brainstorming session with Steve, Erik and Sebastian on where ideas come from. October 7th: Data session with Sebastian. Sebastian will go over how to download and work with micro data sets in Stata or Matlab. October 14th: Homework 1 review led by Sebastian. October 21st: No Session October 28th: Discussion of Referee Reports November 4th: Homework 2 review led by Sebastian November 11th: Discussion of paper extension #1 led by Sebastian November 18th: TBA November 25th: No Session December 2nd: No Session (two sessions the following week for paper presentations) December 6th/7th Paper presentations (at night) 7