2. Analysis of Cross Section and Panel Data Introductory Econometrics A Modern Approach Zhang Yuan, Lu Ming, Feng Jin China Center for Economic Studies and Economic Department Fudan University

3. Motivation Econometrics –To learn or to use? –Advanced or applied?

4. Different Data Structure Cross-Sectional Data –Random sampling; ordering –(Pooled Cross Sections) Time Series Data –Time dependent; Data frequency; Seasonal pattern Panel Data –Characteristic of cross sectional members

5. Our Focus Cross-Sectional Data –Fundamental approach Panel Data –Pooled Cross Sections; Fixed effects and Random effects Advanced Topics –IV and 2SLS; Simultaneous Eq. ; Limited Dependent Variable Models and Sample Selection Corrections;

6. 授课安排 ： CH1-CH9 ：章元 CH13-14 ：封进 CH15-16 ：罗长远 CH17 ：封进 CH19 ：章元 考试形式： 闭卷或者交论文

7. (1) 1 lecture/1 week=2hours (2) Selected papers are available as examples of the techniques. (3) PPT files are available. (4) Stata commands will be introduced with the examples. Sample data are downloadable for the textbook examples. (5) Totally 17 weeks. (6) English textbook is preferred and available in bookshops.

8. Readings Textbook: –Jeffrey M. Wooldridge, “Introductory Econometrics—A Modern Approach”. References: –J.M. Wooldridge, Econometric Analysis of Cross Section and Panel Data. –W.H. Green, Econometric Analysis. –Cheng Hsiao ，《面板数据分析》，北京大学出版社影印版． Some Papers Web: http//:luming.essrc.org

9. Chap 1. The Nature of Econometrics and Economic Data

10. 1.1 What’s Econometrics? Econometrics is based upon the development of statistical methods for estimating economic relationships, testing economic theories, and evaluating and implementing government and business policy. Sample----Population Applications

11. 1.2 The Structure of Economic Data Nonexperimental Data (Observational data) eg. demand, supply, price, wage, income Experimental Data eg. game, social learning Natural experiment eg. “shocks, disater”

12. Cross-Sectional Data De Long and Summers (1991). The ordering of the data does not matter

13. Time Series Data Minimum wage and employment - Castillo-Freeman and Freeman(1992) Time dependent; Data frequency; Seasonal pattern

14. Pooled Cross Sections Pooling cross sections from different years; Effectively analyzing the effects of a new govt. policy; Eg: RHS and incentive for long term investment on land; WTO and production

15. Panel or Longitudinal Data The same cross sectional members; To control certain unobserved characteristic of cross sections; To study the importance of lags;

16. Rotating Panel Data Rural Survey Team of NBS: change 20% of the sample every year.

17. 1.3 Theoretical and Empirical Analysis To test a theory or to estimate a relationship Econometric Model –How to? Economic Model → Econometric Model Economic Model –Utility maximization Intuition

18. 1.3.1 Economic Model Benchmark: choice of labor supply –Leisure, labor (legal jobs, illegal crime) –Allocation of resource Economic Model –y hours spent in criminal activities; –x 1 “wage” for an hour spent in criminal activity; –x 2 hourly wage in legal employment; –x 3 income other than from crime or employment; –x 4 probability of getting caught; –x 5 probability of being convicted if caught; –x 6 expected sentence if convicted; –x 7 age

19. 1.3.2 Econometric Model The relations between economic model and econometric model f—specification of function form x—key factors u—unobserved factors (error term or disturbance)

20. 1.3.3 Other Steps Data Collecting –Carefully; preparations Estimation of parameters in the ec model –Econometric methods Test (and check) Implications——prediction; policy

21. 1.4 Causality and Ceteris Paribus Ceteris Paribus——others being equal The economist’s goal is to infer that one var. has a causal effect on another var. Questions: –How can we measure the Ceteris Paribus Effects of Fertilizer on Crop Yield ? –Exogeneity, Endogeneity (missing variable, measurement error, simultaneity)