ECO433 Empirical Strategies for Causal Analysis

• Topics

  In most of economics, marketing and business management, we are interested in causal relations between variables, rather than mere correlations. For example, it is not the correlation between marketing expenses and sales that is of interest, but the effect of increasing marketing expenses for a product on the sale volume of the same product. In this course, we study methods for estimating and identifying such causal effects.

  First, the course provides a short review of basic regression techniques. Second, we introduce the topic of causal analysis. We will define causal effects based on the potential outcomes framework, encounter the fundamental problem of causal analysis, and discuss what separates association from causation. In the third part of the course, we discuss randomized experiments as the predominant way for establishing causality. Last, we use the potential outcomes framework to discuss designs and methods for data from observational studies. In particular, designs and methods covered include instrumental variables, difference-in-difference, regression discontinuity design, and synthetic control method. Examples from the literature and step-by-step tutorials offer hands-on experiences in utilizing the methods.

   

  Preliminary course outline:

  - Short review of basic regression techniques (inference, asymptotics and dummy variables)

  - Causal inference using potential outcomes

  - Randomized experiments

  - Regression and causality

  - Instrumental variables (LATE)

  - Fixed effects and panel data

  - Differences-in-differences

  - Regression discontinuity design

  - Synthetic control method

• Learning outcome

  Knowledge - at the end of the course students will:

  • have a sound knowledge on different methods for causal analysis   
  • understand how empirical methods can be used for testing the implications of theoretical models and interpret the estimation results
  • understand the assumptions necessary to estimate causal effects

   

  Skills - at the end of the course students will:

  • be equiped with the intuition and skills necessary to understand and to apply methods of causal analysis to actual observational and experimental data
  • be able to formulate a research questions
  • be able to critically assess reports discussing associations between variables and interpret causal effects
  • know how to write and run do-files with relevant commands and produce tables and figures in STATA

   

  General Competence - at the end of the course students will:

  • be able to independently estimate causal effects for instance as a part of a master thesis or in future professional careers

• Teaching

   Plenary lectures, STATA labs sessions, term paper and class presentation (in groups).

• Required prerequisites

  We assume familiarity with linear regression at the level of the courses ECO402, or equivalent.

• Assessment

  The final grade will be based on a term paper including a class presentation in groups (40%) and a final written exam (3 hour) (60%).

• Grading Scale

  Grading scale A - F.

• Computer tools

  STATA

• Literature

  Angrist and Pischke (2014). "Mastering Metrics - the Path from Cause to Effect", Princeton University Press.