Econ 399 Chapter1

# Econ 399 Chapter1 - Econ 399 Introductory Econometrics...

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Econ 399 Introductory Econometrics Multivariable Regressions Multivariable Inference Multivariable Statistical Adjustments Lorne Priemaza, M.A. [email protected]

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1. Nature of Econometrics 1.1 What is Econometrics? 1.2 Steps in Empirical Economic Analysis 1.3 The Structure of Economic Data 1.4 Causality and the Notion of Ceteris Paribus in Econometric Analysis *Note: All uncredited quotes are from Wooldridge’s Introductory Econometrics (2006)
1.1 What is Econometrics? Definition “Econometrics is based upon the  development of statistical methods for  estimating economic relationships,  testing economic theories, and  evaluating and implementing…policy”

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1.1 What is Econometrics? Uses -What impact does the price of writable  DVD’s have on the price of movie popcorn?  (estimating relationship) -Success of a marriage is inversely related  to time spent dating. (testing theory) -Implementing a health care fee acts to  eliminate waste.  (evaluating policy)
Econometrics vs. Math. Statistics  (generally) Econometrics Deals with problematic nonexperimental data Nonexperimental Data: Observational Data, observations of agents in the real world Researcher is a passive collector of data from the real world Mathematical Statistics Deals with controlled Experimental Data Experimental Data: Data collected in a controlled environment Researcher is an active collector in a controlled, artificial environment

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1.1 What is Econometrics? Econometrics - Using a hidden camera in a supermarket,  27% of shoppers bought  Captain Chocolate’s  Chocolate Heart Attack in a Box   (CCCHAB)   with extra Chocolate marshmallows Mathematical Statistics -In a focus group of 57 people, 63% chose  CCCHAB  over the top 3 chocolate brands
1.1 What is Econometrics? Note -Econometrics  can  use controlled experiments  and statistics originally devised ways to deal with  observable data -Due to monetary, scope and morality  constraints, econometricians wrestle with  nonexperimental data more often   -ie: a lab study on the mortality rate of middle  class citizens using cell phones is monetarily,  morally, and administratively unfeasible

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1.2 Steps in Empirical Economic Analysis -Empirical analysis generally arises from two  areas: 1) Estimating a Relationship   Ie: What factors determine a hockey  player’s salary? 2) Testing a Theory Ie: Studying after 11pm is less effective  than studying before 11pm.
1.2 Steps in Empirical Economic Analysis “An  Empirical Analysis  uses  data to test a theory or  estimate a relationship.” How?

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1.2 Steps in Empirical Economic Analysis 1) Formulate a question/hypothesis   -Does income influence driving habits?
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