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Topics in Applied Econometrics: Methods and Evidence ETR3 30 hours Claudio Lucifora coordinator Fede

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... parametric and semi-parametric Estimation: an application to quantile regression ... Quantile regressions. Evaluating the Effects of the Minimum Wage on Employment ... – PowerPoint PPT presentation

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Title: Topics in Applied Econometrics: Methods and Evidence ETR3 30 hours Claudio Lucifora coordinator Fede


1
Topics in Applied Econometrics Methods and
Evidence ETR3 (30 hours)Claudio Lucifora
(coordinator)Federica Origo, Paolo Ghinetti,
Simona Comi (teaching assistants)
  • Object
  • The course combines statistical methods and
    applied economics problems
  • Awareness of the empirical approach to economics
  • Experience in the analysis and use of empirical
    data in public economics
  • Understanding the nature of survey data and
    methods of dealing with it
  • The use of econometric software packages as tools
    of policy analysis.

2
Structure and assessment
  • The course is structured in modules on a specific
    topic.
  • (i) lecture
  • (ii) paper presentation
  • (iii) tutorial.  
  • The assessment of the course involves
  • final project, in which the student has to show
    his/her proficiency in writing up an empirical
    paper. This will contribute to 70 percent of the
    final mark.
  • two intermediate assessments to be handed in at
    the middle of the course programme and at the end
    of it (5 pages max. for discussion of the
    results, and programme and log output in
    appendix). This will contribute to 20 percent of
    the final mark.
  • Evaluation of the presentation. This will
    contribute to 10 percent of the final mark.

3
1. Carrying Out an Empirical Project
  • Posing a question, the literature review, the
    theoretical framework
  • Data collection, econometric analysis, a causal
    interpretation, testing and forecasting
  • Writing an empirical paper

4
2. Multiple Regression Analysis with Qualitative
Information Binary (or Dummy) Variables
  • The Economic Analysis of the Gender Earnings Gap
  • The Union-nonunion wage differentials
  • Evaluating Public-Private Wage Differentials
  • The Ranson-Oaxaca decomposition
  • Returns to ICT skills and using a computer

5
In-class work
  • Paper presentation Blau F. D. and L. M. Kahn
    (2000), Gender Differences in Pay, Journal of
    Economic Perspectives, 14(4).
  • Contents This paper uses cross-national
    comparable data from ISSP to analyse the patterns
    and consequences of wage discrimination and
    occupational segregation.
  • Tutorial Evaluating Gender Wage Differentials
    Estimation of wage equations with gender dummy to
    identify the gender-wage gap. (i.e.
    discrimination)
  • Data data Bank of Italy, 2002

6
3. Limited dependent variables
  •   The optimal choice of the educational level.
  •   Female Labour Market Participation, Child
    Care Assistance
  •   The Effects of Taxation on Labour Supply

7
The empirical issue
  • Objective to deal with truncated, censored or
    self-selected samples.
  • Basic question How can we estimates models with
    non-random selected sample?
  • Example We want to estimate a wage equation for
    women
  • Log wixi?ui
  • But wi is observed only if a woman works, i.e her
    reservation wage is lower than the wage market
    offered to her (we do not observe wage if the
    woman does not work).
  • OLS biased, we need to take into account the non
    random nature of the sample.

8
Applications
  • Estimating women wage equations modelling
    participation.
  • Estimating the effect of taxation on labor supply
  • Estimating returns to college

9
In-class work
  • Paper presentation Bardasi and Gormick (2000)
    "Part-time work employment Workers' choice and
    wage penalties in five industrialized countries",
    LIS wp 223
  • Contents This paper uses cross-national
    comparable data from LIS to analyse the patterns
    and consequences of part-time employment among
    women.
  • Tutorial Estimation of models with limited
    dependent variables Women Participation and The
    part-time wage gap.
  • Data households data from SHIW 2002.

10
4. Estimating Treatment Effects under Endogeneity
and Self Selection
  • Policy interventions An analysis of treatment
    effects of interest and models with binary
    endogenous treatment
  • Selection in economic choices a model with self
    selection and endogenous switching
  • Public-Private Schooling Attendance and Family
    Background
  • Pension portability and labour mobility
  • Wage equations, and public-private union-non
    union differentials (revisited)

11
The empirical issue
  • Objective estimating the causal effects of
    binary treatments (union membership, income
    support programs, policy interventions, etc.) on
  • Continuous outcomes
  • Binary outcomes
  • Problems
  • Lack of counterfactuals
  • Lack of experimental data
  • Non-random assignment (endogeneity or
    self-selection)
  • Heterogeneous treatment effect in the population

12
  • The strategy
  • construct counterfactuals using observational
    data
  • Use econometric techniques to recover and
    estimate true causal effects (free of endogeneity
    and selection bias)
  • Key feature well-defined set of assumptions on
    how the causal effect can be identified
    (identification strategy). Alternatives
  • Selection on observable heterogeneity only (PSM)
  • Selection on unobservables (endogeneity or
    self-selection) ? role of unobservable
    heterogeneity

13
  • focus on models with selection on unobservab.
  • Two class of (linear) models will be discussed
  • Binary endogenous treatment
  • Homogeneous (constant) treatment in the populat.
  • genuine endogeneity problem
  • Alternative estimation techniques
  • IV methods
  • 2-step Heckman correction
  • Model with endogenous switching
  • Heterogenous treatment (individual-specific
    effect)
  • Self-selection and comparative advantages
  • 2-step Heckman correction
  • augmented Oaxaca decomposition

14
In-class work
  • Paper presentation Evans and Schwab (1995),
    Finishing high school and starting college do
    catholic schools make a difference?, QJE
  • Contents the paper provides an in-depth and
    clear discussion on how the ideas developed in
    class modify when both the treatment (attending
    a Catholic high school) and the outcome
    (finishing the high school) are binary
    indicators, and, thus, probabilitic models have
    to be used.
  • Tutorial Alternative methods to evaluate the
    public sector wage premium
  • Data Bank of Italy SHIW.

15
5. Non-parametric and semi-parametric Estimation
an application to quantile regression
  • Estimating the Returns to Education and Training
    Programmes
  • Kernel estimates of wage functions
  • Quantile regressions
  • Evaluating the Effects of the Minimum Wage on
    Employment

16
The empirical issue
  • Objective OLS estimate an average effect
    throughout the whole distribution. This might not
    be correct as returns may vary along the (wage,
    income, hours, etc.) distribution. Use
    nonparametric or semiparametric model
  • Problems
  • Choice of banwidth
  • Choice of quantiles (quartiles, deciles,
    centiles?)
  • Counterfactual distribution
  • Heterogeneous effects in the population

17
In-class work
  • Paper to be presented Abrevaya, J. (2001) The
    Effects of Demographics and Maternal Behavior on
    the Distribution of Birth Outcomes, Empirical
    Economics, 26(1).
  • Tutorial Evaluating returns to education (data
    Bank of Italy, 2002)

18
6. Propensity Score Matching (PSM)
  • Evaluating the Effects of Active Labour Market
  • Programmes (ALMP) on (Un)Employment
  • Evaluating the Efficacy of Training Programmes on
    Job Search
  • Estimating the effects of an anti-poverty program
    The schooling cost of teenage wed-lock
    childbearing
  • Estimating the union membership wage premium

19
The empirical issue
  • Objective estimation of the net impact of a
    certain treatment (ex ALMP, training, ICT
    introduction, change in pay compensation schemes,
    etc.)
  • Basic question How and to what extent does
    the treatment change the average outcome
    variable(s) for the individuals/firms who were
    actually treated (ATT)?
  • The problem we cant observe the same individual
    in two different states at the same time and
    (usually) the treated are not a random sample of
    the initial population (self-selection into the
    treatment and/or endogeneity of the treatment)
  • ? Need to estimate the counterfactual situation

20
Applications
  • Evaluating the Effects of Active Labour Market
    Programmes (ALMP) on (Un)Employment
  • Evaluating the Efficacy of Training Programmes on
    Job Search
  • Estimating the effects of an anti-poverty program
  • The schooling cost of teenage wed-lock
    childbearing
  • Estimating the union membership wage premium

21
In-class work
  • Paper presentation Dehejia, R. and Wahba, S.
    (2002), Propensity Score Matching methods for
    non-experimental causal studies, Review of
    Economics and Statistics, 84, 1, 151-161.
  • Contents This paper is aimed at providing
    evidence on the validity of PSM to evaluate
    non-experimental causal studies (application to
    impact of training on earnings in USA, comparing
    PSM results with the benchmark results from the
    experiment).
  • Tutorial impact of vocational training on
    (subsequent) employment probability in Italy.
  • Data individual data from ISTAT, LFS April
    2003.
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