Department of Economics

ECM103 Research Methods

Dr Simon Burke

Room 319 HumSS Buildings.p.burke@rdg.ac.uk

Office hoursWednesday 10.05-12.00Thursday 10.30 – 11.30

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Dr Simon BurkeMain research subject: time series econometricsCurrent research topics:

using time series techniques to identify collusioncomparing the adequacy of models of financial time seriesdeterminants of student well-beingbook: ‘Modelling Non-Stationary Economic Time series’

Teaching: mainly mathematics,statistics, econometrics; intermediatemicro and macroOther responsibilities: Director of UGStudies, School Director ofInternational EngagementPrevious Universities: Lancaster (BA Economics + Maths),Warwick (MSc Econ andresearch student), York (research fellow)

Objectives

• To assist you in the process of undertaking research for your

project or dissertation• Introduce you to the elements of robust

research in economics• To make you aware of and give practice

in the use of information sources (data, journals)

• To develop and plan a piece of research• To develop your academic writing skills

Some Other Matters

• Blackboard – the site is available now. It will be used mainly for course material, but additional material and links will also be provided.

• The assessed exercise of this module will be distributed next week and will be made available on the Blackboard site once it is open. It will constitute the first steps in your project or dissertation.

Word and Excel Classes

• ITS services run a series of courses.• If you have little or no experience in Word or

Excel please sign up for one of these. http://www.reading.ac.uk/internal/its/training/its-coursesbydate.aspx

• Choose Essential or Intermediate levels.• Need to be able to construct graphs,

compute basic statistical quantities, import graphs and diagrams to Word documents, write equations in Word

Lecture 1

The Nature of Research

1.1 What Is Research?

The process of making new discoveries

new empirical regularities

new theoretical results

new understanding of a problem

‘New’ is hard – may have to settle for unusual, unexpected

Typically seek positive results – that something is

‘true’

Negative ones can be just as valuable

Some Recent Papers From theDepartment of Economics

Women migrant workers in the UK: social capital, well-being and integration

Growth and public infrastructureInternational migration, housing demand and access to

home ownershipThe determinants of the location of foreign direct

investment in UK regionsMultinational enterprises: their private and social benefits

and costsInflation dynamics in the new EU member states: how

relevant are external factors?Gender and life satisfaction in the UKDoes consumption-wealth ratio signal stock returns?

What Makes Research Useful?

ValidityClarity of problemLogical structureEvidenceReference to previous investigationsSuitable investigative technique

GeneralisabilityAre findings very specific or can they be

applied beyond the particular investigation?

Rigour and Trustworthiness

Research must be rigorousResearch must be trustworthy

Consider these issues form the outset and whenreading published researchdesigning your research

Data collected systematically?Data interpreted systematically?

Clarity of purposeIs the problem clear?Is the problem well motivated?

1.2 The Preliminary Process

What are YOU curious about?What interests YOU?Why did YOU decide to advance your study

of economics?

Inevitably start with a broad topic

An exampleThe interaction of political systems and

economic prosperity

The interaction of political systems and economic prosperity: your thoughts?

Why?The Arab SpringThe collapse of the Soviet UnionIntervention in Iraq, Afghanistan

Not yet a research questionIt is not specific enough.What is meant by economic prosperity?How can political systems be

characterised?

Narrow down the broad topic towards a research question: don’t go for a Nobel prizeEconomic prosperity

GDP, per capita GDPGrowth in GDP, per capita GDP

Characterisation of political system Frequency of electionsFrequency of change of governmentNumber of political partiesIndependence of the judiciaryDemocracy

ConditioningCategorical conclusions will not be available.They almost certainly will not be supported by your evidence.Any findings must be conditional and reflect uncertainty.Development of your topic should reflect this.‘During the period 1990-2010…’‘If the senior management of a firm is university educated it is likely that…’‘Consider countries in sub-Saharan Africa…’‘In this model we make the following assumptions…’ My example – which countries?

1.3 A Class Exercise (to be continued next week):

Developing a Research Topic

Group exercise: some questions for youa) I will now divide you into groups of 4/5 people.b) Each group appoints a representative.c) A list of 15 topics follows.d) Choose 3 of these topics in order of preference.e) When chosen, group representative comes to

me at the front with: a written list of those in your group with

email addressesa name for your groupa list of your preferred topics

f) Topic allocated on a first come first served basis, so you need to form an orderly queue.

What we are going to doI will describe a sequence of stages in developing a

research topic.I will illustrate these using my example: the interaction

of political systems and economic prosperityAfter the description of each stage, you, as a group

undertake the same task with your topic. KEEP NOTES. If time, each group reports at each stage.

The last stages you will not be able to undertake in the lecture. These you will undertake before the next lecture.

For the next lecture, as a group, you must prepare a 4 minute PowerPoint presentation, describing your topic and the stages in its development. See handout.

Some further comments before we start

These are NOT necessarily topics for you to use for your own project/dissertation. They are illustrative.

When choosing your own topic you should also consider the expertise of members of staff – see the Department of Economics web site.

Then read around one or two topic areas.You will need to decide soon because your

assessment for this module involves the selection of a topic for your research and it must be submitted by November 11th

The topics: a list of broad research areas: choose your 3 topics by group

1) Western capitalism is doomed.2) Globalisation of financial markets has destabilised national economies.3) Multinational corporations are bad.4) International trade is beneficial.5) Central banks cannot control economic prosperity.6) Financial development causes economic development.7) If economic performance improves, people are happier.8) Foreign direct investment (FDI) promotes development.9) Government spending: good or bad?10) Why do firms engage in research and development (R&D)?11) Banks should be heavily regulated.12) Financial remuneration is the main incentive for individual

performance.13) Short term decision making is inconsistent with long term growth. 14) Immigration is economically damaging.15) Education enhances growth.

The interaction of political systems and economic prosperity

Political systems – too vague democracy

Economic prosperity per capita GDP growth

Interaction – relationship, correlation, causality?

With your real topic, refer to the literature to help.It is a good idea to follow established practice. There are usually reasons for it.

1.4 Developing the Topic:Making the Topic More Precise

Modified Topic

The relationship between democracy and (per capita) economic growth

After this, we consider issues raised by this greater precision.

For now, just focus the topic.

Over to you: make your topic more precise.

1.5 Issues Raised By Topic Development

Current topic area:the relationship between democracy and (per capita) economic growth

i) To what extent will the study be empirical (supported by reference to theory)? (Expected to have empirical content.) Can it be empirical?

ii) How can the relationship of interest be explored?Is this a static or dynamic comparison? a) Take a snap shot of a set of countries. Take a sample of countries both democratic and non-democratic and compare growth rates? Static. Cross-sectional.b) Look at the development of one or two countries over time? Take a country that has changed between democracy and non-democracy and examine its growth over time. Dynamic. Time series.c) Look at a group of countries together over time? Dynamic. Panel data.

iv) Sample issues: which countries, when and why?

v) What are the key variables? Can they be measured?Measurement of democracy?

vi) Other factorsOther things cause growth.What other things?Identify conditioning factors.

Keep an open mind, but have a clear starting point.

You will almost certainly have to modify your proposal more than once.

You may have to narrow it further.You may have to use different variables from the ideal.

For my topic:

•Dynamic – interested in the impact of the change in democratic status on GDP per capita growth

•Democracy becomes ‘democratisation’•Single or multiple countries – if possible multiple, model

together, more robust, allows general patterns to emerge

•What countries? Those that have changed democratic status.•When – primarily a period over which a number of countries have changed democratic status.•The counter-factual – do I also need to look at countries that did not experience a change in democratic status?•Heading towards a model of growth that includes democratisation as an explanatory factor.

Now back to you. Develop your topic along these lines.

1.6 Towards Some Hypotheses Current topic area:the relationship between democracy and (per capita) economic growth

i) Direction of impact.

Hypothesis 1 (H1) Democratisation enhances growth (increases economic prosperity)

ii) Size of impact.

Hypothesis 2a (H2a) The impact of democratisation is statistically significant

Hypothesis 2b (H2b) The impact of democratisation is economically significant

iii) Comparative size of impact

Hypothesis 3a, b, c (H3a,b,c) The impact of democratisation is less than that of other variables in standard growth models: investment, government spending, and income

iv) Delay of impact

Hypothesis 4 (H4) Democratisation does not have an immediate impact on growth

v) Shape of impact

Hypothesis 5 (H5) The impact of a democratising event is unambiguously positive

vi) Hypotheses based on a reading or knowledge of the literature.What would theory predict?

Hypothesis 6 (H6) Individual country effects result in a varying impact of democratisation. This might include institutional structures.

Now back to you. Work out some specific hypotheses to test.

1.7 Risk Analysis SubjectDemocratisation and growth: the relationship between

democratic change and per capita economic growth

i) What has already been done in the field?The work must have something different about it.New countries, new period, new variables, new techniques.

ii) What is the definition of ‘democratisation’?

iii) Data on democratisation.Does data on democratisation exist?For which countries and what time periods?Is it necessary to modify the definition to suit the data?

iv) Data on conditioning variables.What are the conditioning variables and is data available?

v) Impact of missing variables.Danger of confusing the impact of democratisation with

something not considered.

vi) Reverse causality.More subtle: perhaps growth causes democratisation (as

well).

vii) Empirical methodology.How is the data to be analysed (assuming it is available)?

viii) Duration of research.How long will this take and how does it fit into the time

available?Now back to you. Consider what risks your research project issubject to.

1.8 For Next Week

Prepare a brief PPT presentation along the following lines.

a) Give the original topic and explain why it is interesting. (1.3)

b) Present the refinements of the topic. (1.4)

c) Identify issues raised by the refinement. (1.5)

d) Develop some (at least two) specific hypotheses (1.6)

e) Consider the sensitivities of the research programme (1.7)

(continued)

e) Identify some keywords for your topic.f) Using the keywords or otherwise, find two references (papers or

books) that deal with your topic.Go to the library web page:

http://www.reading.ac.uk/library/lib-home.aspxSearch the catalogue – see web page for details of how to

do this.Consult journals using either physical copies in the library,

or ejournals via the library catalogue:Economic JournalAmerican Economic ReviewApplied EconomicsJournal of Economic PerspectivesJournal of Economic Literature

g) Email me a copy of your PPT file by Thursday October 17 th at 13.00. Maximum of 4 slides.

h) You will then present your slides in the lecture, as a group. Talk to last about 4 minutes.

If you’re interested:

Papaioannou, E. and Siourounis, G. (2008) Democratisation and growth. The Economic Journal, 118, 1520-1551.