. syllabus~

8838-001Advanced Econometrics

Professor: Jose Canals-Cerda Address:

Department of Economics Universitv of Colorado at Boulder Campus Box 256 Boulder, Colorado 80309-0256 Phone: 303-492-7869 Fax: 303-492-8960 E-mail: jose.canals-cerda@colorado.edu

Office: ECON 103. Office Hours: Tuesday/Thursday 11 :00-12:15. Class Time: Tuesday/Thursday 12:30-1 :45. Classroom: Econ 5. (The information in this syllabus is subject to change).

Course Objectives.

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The course deals with econometric methods designed for the analysis of cross-section, qualitative, and panel data. The course will attempt to address the needs of both applied economists and theoretical econometricians.

How to contact me.

Office Hours or by appointment.

Grading.

The grade for this class is based on:

Projects and quizzes: 30% Midterm 1 : 10% Midterm 2: 20% Final Exam: 40%

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Students with Disabilities.

This University abides by Section 504 of the Rehabilitation Act of 1973 which stipulates that no student shall be denied the benefits of an education "solely by reason of a handicap." Disabilities covered by law include but are not limited to learning disabilities and hearing, sight or mobility impairments. If you have specific physical, psychiatric, or learning disabilities and require accommodations, please let me know early in the semester so that your learning needs may be appropriately met. You will need to provide documentation of your disability to the Disability Services Office in Willard 322 (phone 303-492-8671 ).

Additional Information.

Please send me a brief email message containing your name and with the subject "ECON8838 Student" . Be aware that most of the course announcements will be done using e-mail. Therefore, it is important that you send this email to me as soon as possible.

Texts and Other Materials.

There is no single book appropriate for this class. The course will be based for the most part on readings from professional journals and working papers. I do not require students to buy any material. However, there are two recommended books:

Amemiya, Takeshi: "Advanced Econometrics." Harvard University Press.

Davidson, R. and J.G. MacKinnon: "Estimation and Inference in Econometrics." Oxford University Press.

William Green: "Econometric Analysis".

Jeffrey M. Wooldridge: "Econometric Analysis of Cross Section and Panel Data"

Paul A. Ruud: "An Introduction to Classical Econometric Theory"

Handbooks of Econometrics.

These are general books that cover a large range of subjects. In addition, the following books are more specialized and provide useful supplementary reading:

Baltagi, Badi (1995): "Econometric Analysis of Panel Data" Wiley ed.

Engle, Robert and Daniel McFadden, eds. (1994): "Handbook of Econometrics, Volume 4". North-Holland.

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Godfrey, L. G. (1988): "Misspecification Tests in Econometrics: The Lagrange Principle and Other Approaches" Cambridge University Press.

Hardle, W. (1990): "Applied Nonparametric Regression." Cambridge University Press.

Hsiao, C. (1986): "Analysis of Panel Data" Cambridge University Press.

Lancaster, T. (1990): "The Econometric Analysis of Transition Data." Cambridge University Press.

Maddala, G.S. (1983): "Limited Dependent and Qualitative Variables in Econometrics." Cambridge University Press.

Manski, C.F. (1988): "Analog Estimation Methods in Econometrics." Chapman and Hall

Manski, Charles (1995): "Identification Problems in the Social Sciences." Harvard University Press.

Silverman, B.W. (1986): "Density Estimation for Statistics and Data Analysis" New York, Chapman and Hall.

Course Outline.

[This material is subject to change]

What follows represent a tentative list of subjects to be covered in class. Obviously, I do not expect to review in class each one of the papers referenced in this list. In class we will review just a few of these papers, and other papers not included in this list if necessary. You will be required to read only these papers that will be covered in class. The remaining papers will be useful if you are planning on writting a paper in an specific topic. The papers to be reviewed in class will be announced with enough time in advance.

1. Mathematical fundamentals.

Fundamental concepts in Topology, Measure Theory, Laws of Large Numbers and Central Limit Theorems.

• Amemiya, Takeshi (1985): "Advanced Econometrics." Harvard University Press. Chaptere 3.

• Davidson, R. and J.G. MacKinnon (1993): "Estimation and Inference in Econometrics." Oxford University Press. Chapter 4.

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2. Estimation and Hypothesis Testing in econometrics .

• Amemiya, Takeshi (1985): "Advanced Econometrics." Harvard University Press. Chapter 4 .

• Davidson, R. and J.G. MacKinnon (1993): "Estimation and Inference in Econometrics."Oxford University Press. Chapter 5, 8,17 .

• Godfrey, L. G. (1988): "Misspecification Tests in Econometrics: The Lagrange Principle and Other Approaches" Cambridge University Press .

• Newey, W.K and D. McFadden (1994): "Large Sample Estimation and Hypothesis Testing." In D. McFadden and R. Engle (eds.). Handbook of Econometrics vol 4, Elsevier, Amsterdam .

• Manski, C.R. (1994): "Analog Estimation of Econometric Models." in D. McFadden and R. Engle (eds.). Handbook of Econometrics vol 4, Elsevier, Amsterdam .

• Hansen, L.P. (1982): "Large Sample Properties of Generalized Method of Moments Estimators." Economtrica 50, 1029-1054 .

• Manski, C.F. (1983) : "Closest Empirical Distribution Estimation." Econometrica 51, 305-319 .

• Thomas J. Rothenberg (1971): "Identification in Parametric Models. Econometrica, Vol. 39, No. 3. pp. 577-591.

• Roger Bowden (1973): "The Theory of Parametric Identification." .Econometrica, Vol. 41, No. 6. pp. 1069-1074 .

• Adrian Pagan, Frank Vella (1989): "Diagnostic Tests for Models Based on Individual Data: A Survey." Journal of Applied Econometrics, Vol. 4, "Supplement: Special Issue on Topics in Applied Econometrics". pp. S29-S59 .

• Gourieroux, C. Monfort, A. and A. Trognon (1984): "Pseudo Maximum Likelihood Methods: Theory." Econometrica 52, 681-700 .

• James J. Heckman (1984): "The X l\2 Goodness of Fit Statistic for Models with Parameters Estimated from Microdata (in Notes and Comments)." Econometrica, Vol. 52, No. 6. pp. 1543-1548.

• Donald W. K. Andrews (1988): "Chi-Square Diagnostic Tests for Econometric Models: Theory." Econometrica, Vol. 56, No. 6. pp. 1419-1453.

• J. A. Hausman (1978): "Specification Tests in Econometrics." Econometrica, No. 6., pp. 1251-1271.

• Alberto Holly (1982): "A Remark on Hausman's Specification Test." Econometrica, Vol. 50, No. 3. (May,), pp. 749-760.

• Whitney K. Newey (1985): "Maximum Likelihood Specification Testing and Conditional Moment Tests." Econometrica, Vol. 53, No. 5. (Sep.,), pp. 1047-1070.

• Whitney K. Newey (1985) : "Generalized Method of Moments Specification Testing." Journal of Econometrics, Vol. 29, 229-256.

• Engle, R. (1984): "Wald, Likelihood Ratio and Lagrange Multiplier Tests in Econometrics." Handbook of Econometrics Vol. 2, 775-826.

3. Econometric analysis of transition data.

• Lancaster, T. (1990): "The Econometric Analysis of Transition Data." Cambridge

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University Press . • James J. Heckman (1991): "Identifying the Hand of Past: Distinguishing State

Dependence from Heterogeneity." The American Economic Review, Vol. 81, No. 2, Papers and Proceedings of the Hundred and Third Annual Meeting of the American Economic Association., pp. 75-79 .

• James J. Heckman, James R. Walker (1990): "The Relationship Between Wages and Income and the Timing and Spacing of Births: Evidence from Swedish Longitudinal Data." Econometrica, Vol. 58, No. 6., pp. 1411-1441.

• J. Heckman, B. Singer (1984) : "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data." Econometrica, Vol. 52, No. 2. pp. 271-320 .

• Elbers, C. and G. Ridder (1982). "True and Spurious Duration Dependence: The Identifiability of the Proportional Hazard Model." Review of Economic Studies: 49. 403-410.

• Heckman, land B. Honore (1989). "The Identifiability of the Competing Risks Model." Biometrika. 76(2) : 325-330.

• Lancaster, T. (1979). "Econometric Methods for the Duration of Unemployment." Econometrica. 47(4): 939-956.

• Han, A. and J. A. Hausman (1990). "Flexible Parametric Estimation of Duration and competing Risk Models." Journal of Applied Econometrics. 5: 1-28.

• Kennan J. F. (1985) . "The Duration of Contract Strikes in U.S. Manufacturing." Journal of Econometrics. 28: 5-28.

• McCall, B. (1996). "Unemployment Insurance Rules, Joblessness, and Part-Time Work." Econometrica. 64(3): 647-682.

• Meyer, B. D. (1990). "Unemployment Insurance and Unemployment Spells." Econometrica. 58(4): 757-782.

• Moffit, R. (1985). "Unemployment Insurance and the Distribution of Unemployment Spells." Journal of Econometrics. 28(1) : 85-101.

• Sueyoshi, G. (1992). "Semi-parametric Proportional Hazards Estimation of Competing Risks Models with Time-Varying Regressors." Journal of Econometrics. 51: 25-58.

• Kiefer, Nicholas (1988) : "Economic Duration Data and Hazard Functions." June Journal of Economic Literature v26 n2 646-79 .

• Flinn, C.J. and J .J. Heckman (1982): "Models for the Analysis of Labor Force Dynamics." In R. Bassman and W. Rhodes (eds.). Advances in Econometrics. Vol.I, 35-95.

• Lillard, L.A. (1993): "Simultaneous Equations for Hazards: Marriage Duration and Fertility Timing." Journal ofEconome_trics v56 nl-2 189-217.

4. Econometric analysis of count data.

• Hausman, J., B.H. Hall and Z. Griliches (1984): "Econometric Models for Count Data with an Application to the Patents R&D Relationship." Econometrica, 52, 909-938.

• Gurmu, S. (1997): "Semiparametric Estimation of Hurdle Regression Models with an Application to Medicaid Utilization." Journal of Applied Econometrics.

• Gmmu, S., S. Stem and P. Rilstone (1998): "Semiparametric Estimation of Count

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Regression Models." Forthcoming: Jomnal of Econometrics . • Gurmu, S. and P. K. Trivedi (1997): "Recent Developments in Event Count Models: A

Survey." Department of Economics Discussion Paper #261, University of Virginia . • Cameron, C. and P.K. Trivedi (1986): "Econometric Models Based on Count Data:

Comparisons and Applications of Some Estimators and Tests", Journal of Applied Econometrics. Vol. 1, pp. 29-54.

5. Discrete Choice Models.

• Amemiya, Takeshi (1985): "Advanced Econometrics." Harvard University Press. Chapters 9, 10 .

• Davidson, R. and J.G. MacKinnon (1993): "Estimation and Inference in Econometrics." Oxford University Press. Chapter 15.

• Maddala, G.S. (1983): "Limited Dependent and Qualitative Variables in Econometrics." Cambridge University Press.

• Manski, C. (1988). "Identification of Binary Response Models." Journal of the American Statistical Association. 83(3):729-738 .

• Guido W. Imbens (1992): "An Efficient Method of Moments Estimator for Discrete Choice Models With Choice-Based Sampling." Econometrica, 60, No. 5., pp. 1187-1214 .

• Cosslett Stephen R. (1983) : "Distribution-Free Maximum Likelihood Estimator of the Binary Choice Model." Econometrica, Vol. 51, No. 3. (May, 1983), pp. 765-782.

• A. Ronald Gallant, Douglas W. Nychka (1987): "Semi-Nonparametric Maximum Likelihood Estimation." Econometrica, Vol. 55, No. 2., 363-390.

• Matzkin, Rosa L. (1993): "Nonparametric Identification and Estimation of Polychotomous Choice Models." Journal of Econometrics v58 nl-2 137-68 .

• Matzkin, Rosa L. (1992): "Nonparametric and Distribution-Free Estimation of the Binary Threshold Crossing and the Binary Choice Models." Econometrica v60 n2 239-70.

• Manski, Charles F. (1985): "Semiparametric Analysis of Discrete Response: Asymptotic Properties of the Maximum Score Estimator." Journal of Econometrics v27 n3 313-33.

• Manski, Charles F. (1975): "Maximum Score Estimation of the Stochastic Utility Model of Choice." Journal of Econometrics v3 n3 205-28.

• Steven Berry (1994): "Estimating Discrete Choice Models of Product Differentiation." RAND Journal of Economics, 25, 242-262.

• Horowitz, J.L. (1992): "A Smoothed Maximum Score Estimator for the Binary Response Model." Econometrica, Vol. 60, No. 3, 505-531.

• Golberg, P. K. (1995): "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry." Econometrica. Vol. 63, No.4, 891-953.

6. The Selection Problem.

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• Amemiya, Takeshi (1985): "Advanced Econometrics." Harvard University Press. Chapters 9, 10 .

• Davidson, R. and J.G. MacKinnon (1993): "Estimation and Inference in Econometrics." Oxford University Press. Chapter 15 .

• Heckman J.J. (1974): "Shadow Prices, Market Wages, and Labor Supply." Econometrica, Vol. 46, No. 4. pp. 931-959 .

• James J.J. Heckman (1978): "Dummy Endogenous Variables in a Simultaneous Equation System." Econometrica, Vol. 46, No. 4. pp. 931-959 .

• James Heckman (1990): "Varieties of Selection Bias (in Selectivity Bias: New Developments)." The American Economic Review, Vol. 80, No. 2, Papers and Proceedings of the Hundred and Second Annual Meeting of the American Economic Association. pp. 313-318 .

• James J. Heckman, Guilherme Sedlacek (1985): "Heterogeneity, Aggregation, and Market Wage Functions: An Empirical Model of Self-Selection in the Labor Market." The Journal of Political Economy, Vol. 93, No. 6. (Dec., 1985), pp. 1077-1125 .

• Heckman, J. (1997): "Instrumental Variables: A Study of hnplicit Behavioral Assumptions Used in Making Program Evaluations." Journal of Human Resources. v32, n3, 442-462 .

• Heckman, J. (1979): "Sample Selection Bias as a Specification Error." Econometrica. 47(1): 153-161.

• Ham, John C. and Robert J. LaLonde (1996): "The Effect of Sample Selection and Initial Conditions in Duration Models: Evidence from Experimental Data on Training. 11

Econometrica v64 nl 175-205 . • Heckman, J. Hidehiko Ichimura, Jeffrey Smith and Petra Todd (1996): "Characterizing

Selection Bias Using Experimental Data." Forthcoming: Econometrica . • Manski, Charles F. (1996): "Learning about Treatment Effects from Experiments with

Random Assignment of Treatments." Journal of Human Resources v3 l n4 709-33 . • Manski, Charles F. (1997): "The Mixing Problem in Programme Evaluation." Review

of Economic Studies. V.64, n4, 537-53. • Manski, Charles ( 1995): "Identification Problems in the Social Sciences. 11 Harvard

University Press . • Manski, Charles F. (1989): "Anatomy of the Selection Problem." Journal of Human

Resources v24 n3 343-60 . • Vella, F (1998): "Estimating Models with Sample Selection Bias." Journal of Human

Resources v31 n4 709-33 . • Mroz, T. (1987): "The Sensitivity of an Empirical Model of Married Women's Hours

of Work to Economic and Statistical Assumptions." Econometrica 55(4):765-99 . • Whitney K. Newey, James L. Powell, James R. Walker (1990): "Semiparametric

Estimation of Selection Models: Some Empirical Results . " The American Economic Review, Vol. 80, No. 2, Papers and Proceedings of the Hundred and Second Annual Meeting of the American Economic Association. pp. 324-328.

7. Semiparametric and Nonparametric techniques in econometrics.

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• Silverman, B.W. (1986): "Density Estimation for Statistics and Data Analysis" New York, Chapman and Hall .

• Hardle, W. (1990): "Applied Nonparametric Regression." Cambridge University Press . • Roehrig, C. S. (1988): "Conditions for Identification in Nonparametric and Parametric

Models." Econometrica, 56, 433-447 . • Kyriazidou, Ekaterini (1997): "Estimation of A Panel Data Sample Selection Model."

Econometrica, 1997: Vol. 65, No 6, p. 1335-1364 . • Whitney K. Newey (1990): "Semiparametric Efficiency Bounds." Journal of Applied

Econometrics, Vol. 5, No. 2. pp. 99-135 . • Donald W. K. Andrews (1991): "Asymptotic Normality of Series Estimators for

Nonparametric and Semiparametric Regression Models." Econometrica, Vol. 59, No. 2., pp. 307-345 .

• A. Ronald Gallant, Douglas W. Nychka (1987): "Semi-Nonparametric Maximum Likelihood Estimation." Econometrica, Vol. 55, No. 2., 363-390.

• Horowitz, J. ( 1996): "Semiparametric Estimation of a Regression Model with an Unknown Transformation of the Dependent Variable." Econometrica, 64, 103-107 .

• Rilstone, Paul, Peter Bearse and Jose Canals, 1996, "Semiparametric maximum likelihood estimation of duration models with unobserved heterogeneity" Working Paper.

• Coppejans M. (1997): "Estimation of the Binary Response Model with Dependent Observations." W.P Duke .

• Stem, S. (1996): "Semiparametric Estimates of the Supply and Demand Effects of Disability on Labor Force Participation," Journal of Econometrics, March/April 1996 .

• Klein, R. W. and R.H. Spady (1993): "An Efficient Semiparametric Estimator for Binary Response Models." Econometrica v61 n2 387-421.

• Ichimura, Hidehiko and T. S. Thompson (1998) "Maximum Likelihood Estimation of a Binary Choice Model with Random Coefficients of Unknown Distribution." Journal of Econometrics .

• Ichimura, Hidehiko (1993) : "Semiparametric Least Squares (SLS) and Weighted SLS Estimation of Single-Index Models." Journal of Econometrics v58 nl-2 71 -120.

• [ + Other previously cited papers J.

8. Panel Data .

• Hsiao, C. (1986): "Analysis of Panel Data" Cambridge University Press . • Baltagi, Badi (1995): "Econometric Analysis of Panel Data" Wiley ed . • Jerry A. Hausman, William E. Taylor (Nov., 1981): "Panel Data and Unobservable

Individual Effects." Econometrica, Vol. 49, No. 6. pp. 1377-1398 • Takeshi Amemiya, Thomas E. MaCurdy (1986): "Instrumental-Variable Estimation of

an Error-Components Model." Econometrica, Vol. 54, No. 4., pp. 869-880 . • Anderson, T.W. and C. Hsiao (1982): "Formulation and Estimation of Dynamic

Models Using Panel Data." Journal of Econometrics, 47-82 . • Breusch, T.S (1987): "Maximum Likelihood Estimation of Random Effects Models."

Journal of Econometrics, 36-3 383-389.

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• Manski, C.F. (1987): "Semiparametric Analysis of Random Effects Linear Models from Binary Panel Data." Econometrica 55, 357-362 .

• Arellano, Manuel and Stephen Bond (1991): "Some Tests of Specification for Panel Data: MonteCarlo Evidence and an Application to Employment Equations." Review of Economics Studies, 58, 1991 , pp. 277-297.

9. Structural Models: Simulation and Estimation.

• Rust, J. (1994) : "Structural Estimation of Markov Decision Processes." In R. Engle and D. Mcfadden (eds.). Handbook of Econometrics. Vol. 4, 3082-3139. North Holland.

• Taber, C. R. (1995). '' Semiparametric Identification and Heterogeneity in Dynamic Programming Discrete Choice Models." Manuscript. Northwestern University .

• Pakes, A. (1986). "Patents as Options: Some Estimates of the Value of Holding European Patent Stocks!' Econometrica. 54( 4): 755-784 .

• Stem S. (1992): "A Method for Smoothing Simulated Moments of Discrete Probabilities in Multinomial Pro bit Models." Econometrica, Vol. 60, n 4, 943-952.

• Berry, S. T. (1992): "Estimation of a Model of Entry in the Airline Industry." Econometrica, Vol. 60, n 4, 889-917

• Stem, S. (1997): "Simulation-Based Estimation," Journal of Economic Literature, December.

• Keane, M. P. and Wolpin, K. I (1997): "The Career Decisions of Young Men." Journal of Political Economy v105 n3 473-522.

• Eckstein, Z. and Wolpin, K. I. (1989): "The Specification and Estimation of Dynamic Stochastic Discrete Choice Models: A Survey." Fall 1989 Journal of Human Resources v24 n4 562-98.

• Eckstein, Z. and Wolpin, K. I. (1989): Dynamic Labour Force Participation of Married Women and Endogenous Work Experience." Review of Economic Studies v56 n3 375-90.

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