Topics in Applied Econometrics

MIT 14.387 J. Angrist (angrist@mit.edu)

Spring 2004 W. Newey (wnewey@mit.edu)

This course covers topics in econometrics and empirical modeling that are likely to be useful to applied
researchers working with cross-section and panel data.

Course requirements and grading: Students are expected to do the readings. In addition, there are 4
graded problem sets, which must be handed in on time for course credit.

Readings are listed below by subject area (*=in the reading packet; J=available through JSTOR; L=MIT
libraries e-journal; W=mimeo on the web; NBER working papers are available from www.nber.org).
Articles for the first and second halves are in separate packets.

FIRST HALF (Angrist)

Parts I-IV correspond to Empirical Strategies lecture notes distributed in class.

I. REGRESSION AND THE CEF

*
G. Chamberlain, “Panel Data,” The Handbook of Econometrics, Volume II, Chapter 22, Amsterdam:
North-Holland, 1983, 1248-1318.

W. Newey and D. McFadden, ``Large Sample Estimation and Hypothesis Testing,'' Chapter 36 in The
Handbook of Econometrics, Volume IV, Amsterdam: North-Holland, 1994.

J. Wooldridge, Chapters 1-4 in Econometric Analysis of Cross-Section and Panel Data, Cambridge: The
MIT Press, 2002.

II. CAUSALITY, REGRESSION, REGRESSION VS. MATCHING

*
J. Angrist and A. Krueger, “Empirical Strategies in Labor Economics,” Chapter 23 in O. Ashenfelter and
D. Card, eds., The Handbook of Labor Economics, Volume III, North Holland, 1999.
J
J. Angrist, "Estimating the Labor Market Impact of Voluntary Military Service Using Social Security
Data on Military Applicants,” Econometrica, 66[2], March 1998, 249-88.

C. Seltzer and S. Jablon, "Effects of Selection on Mortality," American Journal of Epidemiology 100(5),
1974.
J
P. Holland, “Statistics and Causal Inference,” JASA 81[396], December 1986, 945-970, *with discussion.
J
D. Rubin, “Comment: Neyman (1923) and Causal Inference in Experiments and Observational
Studies,” Statistical Science 5[4], November 1990, 472-480. Also, Neyman (1923) translated in
same issue.

Rubin, D. B., 1974, “Estimating Causal Effects of Treatments in Randomized and Nonrandomized
Studies,” Journal of Educational Psychology, 66, 688-701.
*
Rubin, D. B., 1977, “Assignment to Treatment Group on the Basis of a Covariate,” Journal of
 Educational Statistics 2[1], Spring 1977 1-26.
J
Rubin, D. B., 1978, “Bayesian Inference for Causal Effects: The Role of Randomization,” Annals of
Statistics 6[1], January 1978, 34-58.
J
Haavelmo, Trygve, “The Probability Approach in Econometrics”, Econometrica 12, July 1944. iii-iv, 1-
115.

Rosenbaum, R., “Choice as an Alternative to Control in Observational Studies,” Statistical Science 14 [3]
(1999), 259-304.
*
Donald T. Campbell, "Reforms as Experiments," American Psychologist 24 (April 1969), 409-429.

III. ESTIMATING THE EFFECT OF TRAINING PROGRAMS

J
R. Lalonde, "The Promise of Public Sector-Sponsored Training Programs," The Journal of Economic
Perspectives 9[2], Spring 1995, 149-168.

Burghardt, John, et al, “Does Job Corps Work? Summary of the National Job Corps Study,” Princeton:
Mathematica Policy Research, June 2001.

L. Orr, et al, Does Training for the Disadvantaged Work? Evidence From the National JTPA Study,
Washington, DC: The Urban Institute Press, 1996.
J
O. Ashenfelter and D. Card, "Using the Longitudinal Structure of Earnings to Estimate the Effect of
Training Programs on Earnings," The Review of Economics and Statistics 67[4],
November 1985, 648-66.
J
R. LaLonde, "Evaluating the Econometric Evaluations of Training Programs with Experimental Data,"
American Economic Review 76[4], September 1986, 604-620.
J
J. Heckman and J. Hotz, "Choosing Among Alternative Nonexperimental Methods for Estimating
the Impact of Social programs: The Case of Manpower Training," JASA 84[408],
December 1989, 862-8.
*
R. Dehejia and S. Wahba, "Causal Effects in Nonexperimental Studies: Re-evaluating the Evaluation of
Training Programs," JASA 94[448], Dec 1999, 1053-63.
J
P. Rosenbaum and R. Rubin, “Reducing Bias in Observational Studies Using Subclassification on the
Propensity Score,” JASA 79[387], September 1984, 516-524.
J
Rosenbaum, P. R. And D. B. Rubin, 1983, “The Central Role of the Propensity Score in Observational
Studies for Causal Effects,” Biometrika 70[1], April 1983, 41-55.
*
J. Smith and P. Todd, “Reconciling Conflicting Evidence on the Performance of Propensity Score
Matching Methods,” American Economic Review 91[2], May 2001, 112-19.
*
R. Dehejia, “Was There a Riverside Miracle? A Hierarchical Framework for Evaluating Programs with
Grouped Data,” JBES 21[1], January 2003, 1-11.
2
V. J. Hotz, G. Imbens, and J. Mortimer, “ Predicting the Efficacy of Future Training Programs Using Past
Experiences,” NBER Technical Working Paper 238, 1999.

IV. INSTRUMENTAL VARIABLES

A. Models with constant effects; the Wald estimator, grouping, and Two-Sample IV
*
J. Angrist and A. Krueger, “Instrumental Variables and the Search for Identification,” Journal of
Economic Perspectives 15[4], Fall 2001, 69-85.
*
W. Newey, “Generalized Method of Moments Specification Testing,” Journal of Econometrics 29[3],
September 1985, 229-56.
*
J. Angrist, “Grouped Data Estimation and Testing in Simple Labor Supply Models,” Journal of
Econometrics 47 (February/March 1991): 243–266.
J
W. Newey and K. West, “Hypothesis Testing with Efficient Method of Moments Estimation,”
International Economic Review 28, October 1987, 777-787.
J
J. Angrist and A. Krueger, “The Effect of Age at School Entry on Educational Attainment: An
Application of Instrumental Variables with Moments from Two Samples,” JASA 87[418], June
1992, 328-36.
*
J. Angrist and A. Krueger, “Split-Sample Instrumental Variables Estimates of the Returns to Schooling,”
JBES 13[2], April 1995, 225-35.
J
J. Angrist, "Lifetime Earnings and the Vietnam Era Draft Lottery: Evidence from Social Security
Administrative Records," American Economic Review 80[3], June 1990, 313-36.

Wooldridge, 2002, Chapter 5.

B. Instrumental Variables with Heterogeneous Potential Outcomes

J
G. Imbens and J. Angrist, “Identification and Estimation of Local Average Treatment Effects,”
Econometrica 62[2], March 1994, 467-75.
J
J. Angrist, G. Imbens, and D. Rubin, “Identification of Causal effects Using Instrumental Variables,”
with comments and rejoinder, JASA 91[434], June 1996, 444-55.
J
J. Angrist and G. Imbens, “Two-Stage Least Squares Estimation of Average Causal Effects in Models
with Variable Treatment Intensity,” JASA 91[434], June 1995, 444-55.
J
J. Angrist and A. Krueger, "Does Compulsory Schooling Attendance Affect Schooling and Earnings?,"
Quarterly Journal of Economics 106[4], November 1991, 979-1014.

J. Angrist and G. Imbens, “Sources of Identifying Information in Evaluation Models,” NBER

Technical Working Paper No. 117, 1991.
3
J
J. Angrist, G. Imbens, K. Graddy, “The Interpretation of Instrumental Variables Estimators in
Simultaneous Equations Models with an Application to the Demand for Fish,” Review of
Economic Studies 67[3], July 2000, 499-528.
*
A. Abadie, “Semiparametric Estimation of Instrumental Variables Estimation of Treatment Response
Models,” Journal of Econometrics 113[2], 2003, 231-263.
*
J. Angrist, “Treatment Effect Heterogeneity in Theory and Practice,” The Economic Journal 114, March
2004, C52-C83.
J
A. Goldberger, “Structural Equations Methods in the Social Sciences,” Econometrica 40[6], November
1972, 979-1002.

J. Hausman, “Specification and Inference in Simultaneous Equations Models,” Chapter 7 in The

Handbook of Econometrics.

D. Card, "The Causal Effect of Education on Earnings," The Handbook of Labor Economics, Volume
IIIA, Elsevier Science Publishers, 1999.

Wooldridge, 2002, Chapter 18.

C. Additional IV Examples
*
McClellan, Mark, “Does More Intensive Treatment of Myocardial Infarction in the Elderly Reduce
Mortality? An Instrumental Variables Analysis,” Journal of the American Medical Association
272[11], September 1994, 859-866.
L
A. Krueger, “Experimental Estimates of Education Production Functions,” Quarterly Journal of
Economics, May 1999.
J
Permutt, T. and J. Hebel, "Simultaneous–Equation Estimation in a Clinical Trial of the Effect of
Smoking on Birth Weight," Biometrics, 45[2], June 1989, 619-622.
*
Powers, D.E. and S.S. Swinton, "Effects of Self-Study for Coachable Test Item Types," Journal of
Educational Psychology, 76, 1984, 266-78.

V. MISCELLANEOUS TOPICS

A. Bias of 2SLS
J
J. Bound, D. Jaeger, and R. Baker, “Problems with Instrumental Variables Estimation when the
Correlation Between the Instruments and the Endogenous Regressors is Weak,” JASA 90[430],
June 1995, 443-50.
*
J. Angrist and A. Krueger, “Split-Sample Instrumental Variables Estimates of the Returns to
Schooling,” JBES 13[2], April 1995, 225-35.

4
J
A. R. Hall, G. D. Rudebusch, D. W. Wilcox, “Judging Instrument Relevance in Instrumental
Variables Estimation,” International Economic Review 37[2], May 1996, 283-296.
L
J. Angrist, G. Imbens, and A. Krueger, “Jackknifed Instrumental Variables Estimation,” Journal of
Applied Econometrics 14[1], Jan-Feb 1999, 57-67.

G. Chamberlain and G. Imbens, “Hierarchical Bayes Models with Many Instrumental Variables,” NBER
Technical Working Paper 204, September 1996.
J
G. Imbens and D. Rubin, “Bayesian Inference for Causal Effects in Randomized Experiments with
Noncompliance,” Annals of Statistics 25[1], February 1997, 305-327.
*
S. Donald and W. Newey, “Choosing the Number of Instruments,” Econometrica 69[5], September
2001, 1161-91.

Bowden and Turkington, Instrumental Variables, Cambridge University Press, 1984, Section 4.8

P.C.B. Phillips, 1983, “Exact Small-Sample Theory in the Simultaneous Equations Model,” Chapter 8 in
the Handbook of Econometrics.

B. Clustering and the Moulton problem

Grouped Trials and Data

*
B. Moulton, “Random Group Effects and the Precision of Regression Estimates,” Journal of
Econometrics 32[3], August 1986, 385-97.
J
K. Liang, and Scott L. Zeger, “Longitudinal Data Analysis Using Generalized Linear Models,”
Biometrika 73[1], April 1986, 13-22.
*
Z. Feng, P. Diehr, A. Peterson, and D. McLerran, “Selected Statistical issues in Group Randomized
Trials,” Annual Review of Public Health 22, May 2001, 167-87.

Cornfeld, J., “Randomization by Group: A Formal Analysis,” American Journal of Epidemiology 198
(1978), 100-2.

Gail, M.H., S. Mark, R. Carroll, S. Green, and D. Pee, “On Design Considerations and Randomization-
Based Inference for Community Intervention Trials,” Statistics in Medicine 15 (1996), 1069-
1092.

P. Rosenbaum, Chapters 2 and 3 (on exact inference for treatment effects) in Observational Studies, New
York: Springer, 1995.

J. Angrist and V. Lavy, “The Effect of High School Matriculation Awards: Evidence From Randomized
Trials,” NBER Working Paper 9389, December 2002.

5
Serial Correlation and Differences-in-Differences
W
Donald, S., and K. Lang, “Inference with Differences-in-Differences and Other Panel Data,” Boston
University Department of Economics, mimeo, March 2001.

Bertrand, Marianne, E. Duflo, and S. Mullainathan, “How Much Should We Trust Differences-in-
Differences Estimates?” NBER Working Paper 8841, March 2002.
W
C. Hansen, “Generalized Least Squares Estimation in Differences-in-Differences and Other Panel
Models,” MIT Department of Economics, mimeo, March 2003.

C. Limited Dependent Variables and Quantile Treatment Effects

*
J. Angrist, “Estimation of Limited-Dependent Variable Models with Binary Endogenous
Regressors: Simple Strategies for Empirical Practice,” with discussion, JBES, 19[1],
January 2001, 2-16.
*
A. Abadie, J. Angrist, and G. Imbens, “Instrumental Variables Estimation of the Effect of
Subsidized Training on the Quantiles of Trainee Earnings,” Econometrica 70[1],
November, 2001, 91-117.
J
J. Angrist and W. Evans, "Children and their Parents' Labor Supply: Evidence from Exogenous Variation
in Family Size," American Economic Review 88[3], June 1998, 450-477.

D. The Propensity Score Paradox

J
J. Hahn, “On the Role of the Propensity Score in Efficient Estimation of Average Treatment
Effects,” Econometrica 66[2], March 1998, 315-31.
*
J. Angrist and J. Hahn, “When to Control for Covariates? Panel-Asymptotic Results for
Estimates of Treatment Effects,” Review of Economics and Statistics 86[1], February
2004, forthcoming.
*
K. Hirano, G. Imbens, and G. Ridder, “Efficient Estimation of Average Treatment Effects Using the
Estimated Propensity Score,” Econometrica, 71[4], July 2003, 1161-1189.

E. Regression-Discontinuity Methods
L
J. Angrist and V. Lavy, "Using Maimonides' Rule to Estimate the Effect of Class Size on Student
Achievement," QJE, May 1999.

Thistlewaithe, D.L., and D.T. Campbell, “Regression-Discontinuity Analysis: An Alternative to the Ex

Post Facto Experiment,” Journal of Educational Psychology LI (1960), 309-317.

Trochim, William K., Research Design for Program Evaluation: The Regression-Discontinuity
Approach, (Beverly Hills: Sage, 1984).

6
*
van der Klaauw, Wilbert, “Estimating the Effect of Financial Aid Offers on College Enrollment: A
Regression–Discontinuity Approach,” International Economic Review 43[4], November 2002,
1249-87.
*
J.Hahn, P. Todd, and W. van der Klauuw, “Estimation of Treatment Effects with a Quasi-Experimental
Regression-Discontinuity Design,” Econometrica 69[1] (January 2001): 201-9.
W
Porter, Jack R., “Estimation in the Regression Discontinuity Model,” Harvard Department of
Economics, mimeo, May 2003.