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handout1_1 - Introduction to Econometrics Andrew Sweeting1...

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Introduction to Econometrics Andrew Sweeting 1 1 Department of Economics Duke University Spring 2011 Econ 139 Handout 1 (Duke) Course Intro & Probability Review Spring 2011 1 / 38
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Course Policies and Details My background. Class slides & course website (courses.duke.edu). Lecture slides are posted, may be updated Problem sets (not graded) & section handouts are also available (solutions will be posted after the relevant deadlines) Textbook (Stock & Watson 2/3 ed.) and Software (Stata) Exams O¢ ce hours. Problem Sets and Stata: see TAs Conceptual issues: see me Econ 139 Handout 1 (Duke) Course Intro & Probability Review Spring 2011 2 / 38
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What Role Does Econometrics Play in Economics? Econometrics applies statistical techniques and models to data in order to study economic issues 1 Statistics describe important variables: e.g., CPI, trade de&cit, share price volatility; test hypotheses: is growth slowing? welfare implications 2 Test economic theories: theoretical models make predictions which can be tested, e.g., the ±winner²s curse³will cause bidders to reduce their bids in common value auctions, future price changes will be unpredicatable if the stock market is e¢ cient 3 Estimate the parameters of theoretical models, e.g., price elasticity of demand, the marginal propensity to consume 4 Evaluate particular economic policies, e.g., does a minimum wage increase reduce employment in the fast food industry? Econ 139 Handout 1 (Duke) Course Intro ´ Probability Review Spring 2011 3 / 38
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Why Teach Econometrics? 1 allow you to understand and to critique empirical work in applied economics 2 allow you to perform basic empirical research projects (e.g., RA, honors theses) 3 encourage you to think creatively and critically about data whenever you encounter it - it&s not just for academic economists Econ 139 Handout 1 (Duke) Course Intro ± Probability Review Spring 2011 4 / 38
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Examples of Quantitative Microeconomic Questions 1 Do smaller class sizes improve elementary school education? 2 How much does the provision of sleeping nets a/ect the prevalence of malaria? 3 How do sugar taxes a/ect the demand for soft drinks? 4 Do &rst price auctions raise higher revenues than second price auctions? 5 Do grocery industry mergers create economies of scale? Do they raise or lower prices for consumers? Do they hurt local food producers? 6 Why are there so few female urologists? Does this hurt female health outcomes? Econ 139 Handout 1 (Duke) Course Intro ± Probability Review Spring 2011 5 ² 38
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A Key Question: Causation vs. Correlation Econ 139 Handout 1 (Duke) Course Intro & Probability Review Spring 2011 6 / 38
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Causation vs. Correlation Does a change in X really cause a change in Y ? Or do they just co-vary? To evaluate policies and test theories, we need to establish causation. But in the real world, correlation and causation are often very di¢ cult to separate.
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This note was uploaded on 08/02/2011 for the course ECON 139 taught by Professor Alessandrotarozzi during the Spring '08 term at Duke.

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handout1_1 - Introduction to Econometrics Andrew Sweeting1...

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