Lahore University of Management Sciences. Econ 414 Applied Microeconomics Spring 2018

Transcription

1 Lahore University of Management Sciences Econ 414 Applied Microeconomics Spring 2018 Instructor Professor Abid A. Burki Room No. Room 248, Department of Economics Class Timings Office Hours Telephone , Ext Secretary/TA TBA TA Office Hours TBA Course URL (if any) Course Basics Credit Hours 4 Lecture(s) Nbr of Lec(s) Per Week 2 Duration 1 hour 50 minutes Recitation/Lab (per Nbr of Lec(s) Per Week 0 Duration week) Tutorial (per week) Nbr of Lec(s) Per Week 0 Duration Course Distribution Core Elective Open for Student Category Close for Student Category Yes Junior/Senior/MS COURSE DESCRIPTION Lawrence Klein once observed that econometrics recognizes that social behavior is exceedingly complex and that a limited number of variables related together in fairly simple and elegant equations cannot explain the whole of such truth. In a typical classroom setting it is tempting to focus entirely on econometric theory and to lose sight of the underlying goals of the theory, namely to increase understanding of the human behavior by applying these tools. This course is structured to provide students with hands-on experience of implementing econometric techniques with real world data. The course assumes understanding of basic tools of econometric theory and microeconomics. Among the topics covered are applications of simple and multiple regressions into costs, learning curves, and scale economies; measuring wage discrimination by applying dummy variables; parametric and non-parametric productivity; factor demand elasticity and elasticity of substitution with flexible functional forms and equation systems; stochastic frontier and technical efficiency; labor supply and applications of limited dependent variable procedures; and applications of labor supply models to panel data models. 1

2 Lahore University of Management Sciences COURSE PREREQUISITE(S) Intermediate Microeconomics, Basic Econometrics Grading Breakup and Policies The course grade depends on Assignments (25%) Research Project (25%) Mid-term (25%) Final exam (25%) Examination Detail Midterm Exam Final Exam Yes/No: Yes Combine/Separate: Duration: In class Preferred Date: Exam Specifications: Closed books and closed notes; help sheet not allowed; formula sheet not allowed; calculators allowed. Yes/No: Yes Combine/Separate: Duration: 2 hours Exam Specifications: Closed books and closed notes; help sheet not allowed; formula sheet not allowed; calculators allowed. 2

3 Lahore University of Management Sciences COURSE OVERVIEW Session Topics Readings Introduction 1 Introduction to the course; required computer software; simple linear regression model and inference; multiple regression model; application and hands-on exercises. Applications of Simple and Multiple Regressions to Costs and Learning Curves 2 Econometric issues encountered in estimating the cost effects of scale economies and learning curves. This will help to understand differences between simple and multiple regressions, to assess the effects of incorrectly omitting variables from a regression equation, and to implement alternative ways of testing hypotheses. Hands on with costs, learning curves, and scale economies. 3 -do- 4 Measuring Wage Discrimination: Dummy Variables in Regression Models The human capital model; issues in econometric implementation of the human capital model; determinants of wages and estimating the wage effects of discrimination. Hands-on with estimating determinants of wages and earnings. 5 -do- Berndt, Ernst R. (1991). Costs, Learning Curves, and Scale Economies. The Practice of Chapter 3, Berndt, Ernst R. (1991). Analyzing Determinants of Wages and Measuring Wage Discrimination: Dummy Variables in Regression Models. The Practice of Chapter 5, Labour Supply: Applications of Limited Dependent Variable Procedures Models with discrete dependent variable, the Probit model, hypothesis tests in Probit model, the Logit models, the Tobit models, applications to labor supply, selectivity issues. Applications to Mroz data set on female labor supply in the U.S. Berndt, Ernst R. (1991). Whether and How Much Women Work for Pay: Applications of Limited Dependent Variable Procedures. The Practice of Econometrics: Classic and Contemporary. Chapter do 8 -do 9 -do 10 -do- 11 Elasticities of Factor Demand and Substitution: Single Berndt, Ernst R. (1991). Modeling the 3

4 Equation Estimations Lahore University of Management Sciences Hands on estimation of demand for factors of production using single-equation Cobb-Douglas and CES production functions with Berndt-Wood KLEM data for U.S. manufacturing and interpretation of parameters. 12 -do- 13 Flexible Functional Forms and Estimation of Factor Demand in Equation Systems Duality and flexible functional forms, generalized Leontief cost function, the translog specification, and measuring total factor productivity growth. Applications to Berndt- Wood KLEM data for U.S. manufacturing sector. Comparison of equation-by-equation and IZEF procedures, substitution elasticities and curvature checks. 14 -do- 15 Mid-term exam 16 Comparison of Production, Cost and Profit Function Models for U.S. Agriculture 17 -do- 18 -do- 19 -do- Interrelated Demands for Factors of Production: Estimation and Inference in Equation Systems. The Practice of Chapter 9, Berndt, Ernst R. (1991). Modeling the Interrelated Demands for Factors of Production: Estimation and Inference in Equation Systems. The Practice of Chapter Capalbo, Susan M. and John M. Antle (eds.) (1988). Agricultural Productivity: Measurement and Explanation , Stochastic Frontier and Technical Efficiency Defining technical efficiency of firms, description of stochastic frontier model, composed error structure and distributional assumptions, estimation of mean technical efficiency, and determinants of efficiency. TFP calculation and decomposition. Hands-on estimation of stochastic frontier model with data. Aigner, D., C.A. Knox Lovell, and P. Schmidt (1977). Formulation and Estimation of Stochastic Frontier Production Function Models. Journal of Econometrics, 6, Coelli, T., D.S.P. Rao and G. Battese (1998). An Introduction to Efficiency and Productivity Analysis. Kluwer Academic Publishers do- 22 -do- Burki, Abid A., Shabbir Ahmad (2010). Bank Governance Changes in Developing Countries: Is There a Performance Effect? Journal of Economics and Business, 62(2),

5 23 -do- 24 Productivity Lahore University of Management Sciences Index numbers and productivity measurement; the Fisher Index; the Tornqvist index; properties of index numbers; the Malmquist productivity index; parametric approach to measurement of total factor productivity; Tornqvist approximation to the Divisia index. 25 -do- 26 -do- Coelli, T., D.S. Prasada Rao, and George E. Battese (1998). An Introduction to Efficiency and Productivity Analysis. Boston: Kluwer Academic Publishers, Coelli, T. et al. () A Primer on Efficiency Measurement for Utilities and Transport Regulators, World Bank Institute, Washington, D.C. Fare, R., S. Grosskopf, M. Norrris and Z. Zhang (1994). Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries. American Economic Review, 84(1), pp Young, A. (1995). The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience. Quarterly Journal of Economics, 110(3), pp Labor Supply: Applications of Panel Data Models Panel data models; pooled model; fixed effects and random effects models; estimation of pooled, fixed effects and random effects models with applications to Ziliak (1997) data on male labor supply in the US; Hausman specification test. Gujrati, Damodar N. (2004) Basic Econometrics. Fourth Edition. McGraw Hill do- 30 -do- Additional readings may be assigned if necessary. Final Examination Textbook(s)/Supplementary Readings There is no single textbook for the course. Most of the readings are chapters in books or journal articles. Some readings are drawn from: Berndt, Ernst R. (1991). The Practice of Reading: Addison-Wesley Publishing Company. Capalbo, Susan M. and John M. Antle, eds. (1988). Agricultural Productivity: Measurement and Explanation. Washington, D.C.: Resources for the Future. Coelli, T., D.S. Prasada Rao, and George E. Battese (1998). An Introduction to Efficiency and Productivity Analysis. 5

6 Boston: Kluwer Academic Publishers. Lahore University of Management Sciences 6