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Module Code: ECO00003
ECONOMETRICS 2
SUMMATIVE ASSIGNMENT – SPRING/SUMMER 2023
The submission deadline for the Econometrics 2 summative assignment (project) is Thursday
27 April 2023, by 2pm (UK time).
1. Introduction and Research Question
Research question:
The purpose of this project is to specify, estimate, interpret and evaluate an econometric
model of the wage equation with a specific focus on the association between wage and
education, in particular, whether individuals with a University degree have different
wage structures to other employees.
You are expected to conduct an econometric analysis to answer this research question and
submit a report of 2,500 words. Instructions on how to format, structure and submit your report
are presented in pages 2-5.
The project data is a sample of cross-section data from the Quarterly Labour Force Survey
(QLFS), September – November 2021 dataset. The dataset is called Project2023.dta.
Instructions on how to download the dataset and a description of the variables are presented in
section 3. You are advised to use STATA to conduct the econometric analysis (see section 4).
Support after the project is released will be limited to purely technical help with STATA (see
section 5).
A detailed marking grid, which will be used for the overall assessment of your project and
shared as individual feedback, is available at the VLE submission point. Markers will be
looking for strong evidence of a sound understanding of key concepts and methods of
econometrics, ability to conduct an econometric analysis as well as critical and original
thinking.
We would encourage you to view your project as a way to ‘showcase’ your econometric skills.
In particular, we encourage you to take the space and time in your project to fully interpret your
results and the implications for your econometric model and estimates (including the full
explanation of how any test(s) undertaken is constructed and carried out), relate your answer
to the research question as clearly as possible and discuss the limitations of your methods and
results.
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2. Instructions: word limit, format, submission and project report outline
2.1 Word limit and format
The project report should not be longer than 2,500 words of text and excessive length will be
penalised: only the first 2,500 words will be graded. Please note that the project title, exam
number, bibliography, figures, equations and tables are not included in the 2,500 word count.
The main results (regression outputs, tests) should be integrated into the main body of your
report. Additional tables of results, graphs and diagrams etc. can be presented in appendices
and will not be counted within the 2,500 words. (The appendices should not exceed eight
pages). For example, you might include the calculation of test statistics in the appendices and
the hypotheses, explanation of the test, results and interpretation in the main body of the report.
Please consider the readability of your project:
Use a standard font (Calibri, Arial or Times New Roman), size 12, font colour Black.
Your figures, tables and regression outputs should be legible and captioned.
You can provide screenshots of relevant STATA outputs or export the results in tables.
All materials should be appropriately referenced, e.g. the Harvard referencing style is advised.
Your final report should be compiled in a single PDF document:
It is your responsibility to make sure that the PDF document is legible.
You do not have to submit your Stata logs or do file.
Your report will be marked anonymously. Do not include your name or student number. Only
include your exam number (starting with Y…).
2.2 Submission
As mentioned above, the submission deadline for the Econometrics 2 summative assignment
is Thursday 27 April 2023, by 2pm (UK time).
Your project should be submitted electronically through the VLE (see Econometrics 2 2023
Project submission point on the Econometrics 2 VLE page). Please follow the instructions on
the VLE page. You will also find important information on the exceptional circumstances
process.
This formally assessed project forms 100% of your final module mark for Econometrics 2
(ECO00003I).
Under no circumstances should you submit a project that you have worked on with another
student, this is an individual project for you to complete on your own.
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2.3 Project report outline
Your project report should include the following sections listed 1-9 below. The descriptions
below indicate the material that should be included in your report. Please note though that if
you have further tests, hypotheses or relevant discussion that you wish to include in your
project you should do so.
Section 1 – Introduction and description of the economic model
This should be a brief introduction to the wage equation in general, and how education might
have an impact on an employee’s wage and wage structure.
Please note:
“Wage equation” refers to an equation where the dependent variable is “wage” (in some
form) and the components of the equation include independent variables or the factors
that determine the “wage”. The nature of the relationship between these independent
variables and the dependent variable is referred to as the “wage structure”.
Although you need a clear introduction to the topic, please do not write an essay on
‘wages’. The purpose of the 2nd year Econometrics project is to show that you can
undertake an econometrics project, rather than write an essay. So please note that a
concise and focussed introduction drawing out the important variables for the analysis
of the wage equation at the micro level should be the aim.
More generally, please note that a good project report should demonstrate: some
knowledge of the economics of the wage equation and its relation to the estimated
coefficients; a good understanding of the formulation of hypotheses and the appropriate
test statistics; and the flexibility to formulate and test new hypotheses of interest.
Reading:
You will find on the VLE references to core undergraduate Labour Economics
textbooks and academic papers that should provide sufficient background for your
project but you will benefit from reading more widely. You must reference any material
you have used correctly and fully in the text and in your bibliography. If you are in any
doubt about the conventions of academic referencing, review the Academic Integrity
on-line tutorial that you completed in autumn term of 1st year on the VLE and access
the Academic Integrity website www.york.ac.uk/integrity. For further information
please see your DERS Student Handbook.
Section 2 – Description of the econometric model
Consider this in relation to the ideal econometric specification i.e. variables that you would
have liked to include in your model as well as the actual variables you are going to include.
For example, you may wish to formally specify the model you would have wished to estimate
(if you had the variables) as well as the model that you are actually going to estimate for your
project. This section should also note the functional form that you will be using.
Present your econometric model in the form of a population regression function.
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Please note:
You are advised to choose a semi-log model specification where the dependent variable
is a logarithm. However, this should not discourage you from formally investigating
the appropriateness of this functional form in Section 5.
Section 3 – Statement of the hypotheses to be tested
State the hypotheses (both the null and alternative) that you will consider for investigating the
research question presented in page 1, along with the tests that you will use to test these
hypotheses. In addition, you should include a full description of how these tests will be
implemented. The tests presented could include, for example, tests of individual, joint or
overall significance, tests for structural equivalence etc. The actual testing of your hypotheses
and interpretation of results should be presented in Section 6 below.
You can also present further additional hypotheses that you consider of particular interest given
any preliminary analysis or consideration of initial findings.
Section 4 – Discussion of any data issues, limitations, concerns
Consider issues of measurement error on the dependent variable and the explanatory variables
related to education and discuss potential implications on your model and estimates.
Section 5 – Presentation of your estimated model(s) and specification tests
Present your estimated model in the form of a sample regression function and provide the
relevant STATA output.
Present your specification tests, explain why they are relevant to consider and how they have
been undertaken. Present the results of the specification tests and discuss the implications for
your model and estimates.
You can present more than one estimated model but should explain why you think this is
appropriate or relevant.
Section 6 – Interpretation and discussion of your results
Provide an interpretation of the sign, magnitude and statistical significance of all estimated
coefficients (based on appropriate standard errors given your specification tests undertaken in
section 5).
Provide and interpret the results of the tests you presented in Section 3.
Provide an answer to the research question presented in page 1 and discuss potential limitations
of your approach and results.
Please note:
Make sure that you interpret your results appropriately and fully given the functional
form of the model. Consider each of the partial regression coefficients in relation to
whether the partial regression coefficient is, for example, attached to a dummy variable,
or whether there is a quadratic form in the explanatory variable of interest. Consider