Introduction to Econometrics
Econ 322
Fall, 2010
Lecture 12: Simple Linear Regression IV
October 13, 2010
1 / 20
Topics Covered
Topics Covered
What if X is a binary
variable?
Determining Performance
of the Regression
Reporting Regression
Results
The deter
Introduction to Econometrics
Econ 322
Fall, 2010
Lecture 14: Multiple Regression
October 20, 2010
1 / 16
Topics Covered
Topics Covered
The General Linear
Regression Model
The Least Squares
Estimator for the GLRM
The GLRM in matrix
notation
Assumptions of
Adam Smith (1723-1790)
Adam Smith's chief contribution was to build a coherent and logical theory of how the economy
works. The elements of Smith's theory were mostly already available in the writings of earlier
writers. However, in these writings good id
Gary Stanley Becker (1930 - )
Economics and Sociology
Becker repeatedly applies the tools of rational choice to analyze sociological issues that
were traditionally regarded as outside economics.
Investments in human capital Becker formalized the theory of
The Rise of Demand in Classical Theories of Value: Bentham, Mill, Dupuit
Jeremy Bentham (1748-1832)
The idea of utility maximization: Choices must be based on utility
maximization. Bentham provided the first statement of what has since become a
commonplac
Economics and Politics
James Buchanan (1919- )
Buchanan is regarded as one of the founders of public choice theory, which seeks to
analyze politics with the methods of economics. The main idea is that governments
consist of people who are motivated by the
Richard Cantillon
The classical school is distinguished by its focus on the macroeconomic interconnections
between different sectors of the economy, such as farmers, landowners and
manufacturers. This orientation was derived not from pre-classical economi
Antoine Augustin Cournot (1801-1877)
Cournot pioneered the modern price theory for industries consisting of profit maximizing
firms.
He introduced differential calculus and the associated mathematics of maximization into
economic analysis. These eventuall
Irving Fisher (1867-1947)
The Rate of Interest, 1907
The Theory of Interest, 1930
The Purchasing Power of Money, 1911
Mathematical Investigations in the Theory of Value
and Prices, 1925
He showed that a consumption tax is a better policy
than an income ta
John Kenneth Galbraith (1908-2006)
Countervailing Power. Galbraith argued that capitalism does not lead to greater and
greater levels of competition among producers. Instead, it leads to the gradual emergence
of monopoly (a market with one seller) or olig
Game Theory
Game theory looks at rational behavior when each decision makers well-being depends
on the decisions of others as well as her own.
Game theory consists of cooperative and non-cooperative game theory. In cooperative
game theory, it is assumed t
LECTURE NOTES ECO 54 UDAYAN ROY
John Maynard Keynes (1883-1946)
Significance of the Great Depression for
Economic Theory
The classical or neoclassical theories implied
full-employment. (After all, if there are any
unemployed people they would offer to wor
Long Run Growth
Classical
Neo-Classical
Keynesian
Frank P. Ramsey (1903-1930)
Ramseys article A Mathematical Theory of Saving (1928) introduced the use of the
calculus of variations to growth theory. The idea behind Gossens equi-marginal principle
was
The Marginalist Era (1830-1930)
Assumption: Firms have goalsusually higher profits. Out of all the decisions a firm
could take, it will pick the one that maximizes profits.
Assumption: People have goalsusually higher utility. Out of all the decisions an
i
LECTURE NOTES ECO 54 SPRING 2005 UDAYAN ROY
Karl Marx (1818-1883)
Marxs contributions can be
discussed under the following
sub-headings:
Theory of History
Theory of Capitalism
Formal Economics:
The First Two-Sector
Growth Model
Theory of History
Marxs the
Ricardos Theory of Income Distribution
Consider Table 1 below. It shows how food output on a plot of land depends on the
quality of the landtype A being the most fertile and type F being the least fertile
and the number of workers on each plot.
Functional
Thomas Robert Malthus (1766-1834)
Malthus's theory of population argued that population grows at a geometric rate while food
output grows at an arithmetic rate and that food scarcity was, therefore, inevitable. In other
words, nature imposes firm limits o
Introduction to Econometrics
Econ 322
Fall, 2010
Lecture 10: Simple Linear Regression III
October 11, 2010
1 / 22
Topics Covered
Topics Covered
Some Additional
Assumptions
Homoscedasticity
Assumption
An estimator for the
variance of 1
An Alternative
Assum
Introduction to Econometrics
Econ 322
Fall, 2010
Lecture 10: Simple Linear Regression II
October 6, 2010
1 / 14
Topics Covered
Topics Covered
The Simple Linear
Regression Model
Assumptions of the SLRM
Assumption 1
Assumptions 2 and 3
Properties of the OLS
Introduction to Econometrics
Econ 322 Section 1
Fall, 2010
Lecture 19: Non-linear models (cont)
November 8, 2010
1 / 28
Topics Covered
Topics Covered
Logarithmic functions of Y
and/or X
Three Important Cases
I. Linear-Log Model
II. Log-Linear Model
Log-Lo
Introduction to Econometrics
Econ 322
Fall, 2010
Lecture 21: Panel Data Methods
November 15, 2010
1 / 32
Topics Covered
Topics Covered
Panel Methods
Notation
Uses of Panel Models
Key Idea
Trac Death Data for
1982
Trac Death Data for
1988
Reasons for Stran
Introduction to Econometrics
Econ 322
Fall, 2010
Lecture 22: Regression with a Binary Dependent Variable
November 17, 2010
1 / 25
Topics Covered
Topics Covered
Examples of Binary
Dependent Variable
The Linear Probability
Model
Example: Probability of
Gett
Introduction to Econometrics
Econ 322
Fall, 2010
Lecture 24: Instrumental Variables Estimation (IV) I
November 29, 2010
1 / 23
Topics Covered
Topics Covered
Motivation
IV in the SLRM with one
instrument
Conditions for a valid
instrument
Two Stage Least Sq
Introduction to Econometrics
Econ 322
Fall, 2010
Lecture 26: Introduction to Time Series Methods
December 6, 2010
1 / 27
Topics Covered
Topics Covered
What is a time series?
Why use time series?
New Problems to deal
with!
Forecasting
Some Denitions
Exampl
Introduction to Econometrics
Econ 322
Fall, 2010
Lecture 27: Introduction to Time Series Methods II
December 8, 2010
1 / 30
Topics Covered
Topics Covered
Causal Models using Time
series
When does OLS make
sense for estimating a
linear regression with time