Economics 374
Research Seminar:
Topics in Policy Evaluation and Modern Microeconometrics
Spring 2013

Instructor: James J. Heckman (jjh@uchicago.edu)
Lecture time: Tuesdays, 3:00pm-6:00pm
Lecture classroom: Rosenwald 301

Guest Lecturers:

• Philipp Eisenhauer (eisenhauer@policy-lab.org)
• Rosa Matzkin (matzkin@econ.ucla.edu)
• Magne Mogstad (magne.mogstad@gmail.com)
• Ismael Mourifie (ismaelyacoub@gmail.com)
• Azeem Shaikh (amshaikh@uchicago.edu)

Teaching Assistants:

• Sara Moreira (sarapfmoreira@gmail.com)

TA sessions:

• Mondays, 5:00pm-7:00pm in Social Sciences Room 302
• Thursdays 5:00pm-6:00pm in Rosenwald Room 301

TA Office Hours: Please make an appointment, and a location will be chosen.

If you experience problems with this website, please contact Jennifer Pachon.

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Class Overview

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This course presents research topics in modern microeconometrics as it is relevant for policy analysis.

The grade is determined by homework exercises (50%) and by a final take-home exam (50%--students will have 3 days to write the exam).

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Syllabus

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NOTE: The lecture notes are posted here for your convenience. Professor Heckman is likely to edit them significantly over the course of the quarter. Please keep this in mind if you intend to print them out.

Topic I. Causal Models and the Evaluation of Economic Policy (First Two Lectures)

• Heckman, James J. (2012). Notes: "Economic Approaches to the Evaluation of Public Policy."
• Heckman, James J. (2010). "Building Bridges between Structural and Program Evaluation Approaches to Evaluating Policy," Journal of Economic Literature, 48(2): 356-398.
  • Handout for Heckman (2010).
• Heckman, James J. (2008). "Econometric Causality." International Statistical Review, 76(1):1-27.
  • Handout for Heckman (2008).
  • Enlarged paper for Heckman (2008).
• Heckman, James J. (2008). "The Principles Underlying Evaluation Estimators with an Application to Matching." Annales d'Economie et de Statistiques, 91/92(Special Issue).
  • Handout for Heckman, James J. (2010). "The Principles Underlying Evaluation Estimators with an Application to Matching."
• Handouts:
  • Empirical Research in Economics; Econometric Causality and Policy Analysis; Regression and Simultaneous Models

Topic II. Classical Discrete Choice Theory

• Domenchich, T. and McFadden, D. (1975). Urban Travel Demand. (Amsterdam: North-Holland). Chapter 3 and Chapter 4.
  • Handout for Chapter 3 and Chapter 4 of Domenchich and McFadden (1975).
• Matzkin, Rosa L. (2007). "Nonparametric Identification," In: James J. Heckman and Edward E. Leamer, Editor(s), Handbook of Econometrics, Volume 6, Part B. Amsterdam: Elsevier. pp. 5307-5368.
  • Enlargement of Matzkin (2007).
  • Handout for Matzkin (2007).
• Manski, Charles F. (1988). "Identification of Binary Response Models." Journal of the American Statistical Association, 83(403): 729-738.
  • Handout for Manski (1988).
• Matzkin, R.L. (1992), "Nonparametric and Distribution-Free Estimation of the Binary Threshold Crossing and the Binary Choice Models," Econometrica, 60(2): 239-270.
  • Handout for Matzkin (1992).
• Matzkin, Rosa L. (1993). "Nonparametric Identification and Estimation of Polychotomous Choice Models." Journal of Econometrics, 58: 137-168.
  • Handout for Matzkin (1993).
• Cosslett, S. R. (1983). "Distribution-Free Maximum Likelihood Estimator of the Binary Choice Model." Econometrica, 51(3): 765-782.
  • Handout for Cosslett (1983).
• Ichimura, Hidehiko and T. Scott Thompson. (1998). "Maximum Likelihood Estimation of a Binary Choice Model with Random Coefficient of Unknown Distributions." Journal of Econometrics, 86(2): 269-295.
  • Handout for Ichimura and Thompson (1998).

Handouts:

• Identification in Multinomial Probit Models with Associated Outcomes and Measurements
• Discrete Choice with Proofs of Identification
• Discrete Dependent Variable Models
• Heckman, James J. and Rodrigo Pinto. (2013). "Definitions and a Unified Analysis of Identification of Recursive Causal Models"

Topic III. The Roy Model and the Generalized Roy Model

• Heckman, J. (1985). “Selection Bias and Self-selection,” The New Palgrave: A Dictionary of Economics, (MacMillan Press, Stockton, New York), 287-296.
  • Handout for Heckman (1985).
• Heckman, James J. (2008). "Selection Bias and Self-Selection." In The New Palgrave Dictionary of Economics. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. New York: Palgrave Macmillan.
  • Handout for Heckman (2008)
• Heckman, J. J. and Honoré, B. (1990). "The Empirical Content of the Roy Model." Econometrica, 58(5): 1121-1149.
  • Handout for Heckman and Honore (1990).
  • Handout: "Econometric Causality and the Roy Model"
  • Handout: Almlund, Mathilde, and James J. Heckman. (2012). "The Roy Model and the Generalized Roy Model." Appendix.
  • Handout: "Notes on Generalized Roy Model."
  • Handout: "The Generalized Roy Model Applied to the Problem of Policy Evaluation."
• Cunha, Flavio, James J. Heckman and Salvador Navarro. (2005). "Separating Uncertainty from Heterogeneity in Life Cycle Earnings," Oxford Economic Papers, 57(2):191-261.
  • Handout for Cunha, Heckman, and Navarro (2005).
• Heckman, J. and G. Sedlacek (1985). "Heterogeneity, Aggregation and Market Wage Functions: An Empirical Model of Self-Selection in the Labor Market,"Journal of Political Economy, 93(6), 1077-1125.
  • Handout for Heckman and Sedlacek (1985).
• Heckman, James J. (1974) "Shadow Prices, Market Wages, and Labor Supply." Econometrica, 42(4):679-94.
• Handout for Heckman (1974).
• Flinn, Christopher and James J. Heckman. (1982). "New Methods For Analyzing Structural Models of Labor Force Dynamics." Journal of Econometrics, 18(1):115-168.
  • Handout for Flinn and Heckman (1982).
• Chesher, Andrew and Adam M. Rosen. (2012). "Simultaneous Equations Models for Discrete Outcomes: Coherence, Completeness, and Identification." Unpublished manuscript, CeMMAP & UCL.
  • Handout for Chesher and Rosen (2012).
• Heckman, James J. and Edward Vytlacil. (2005). "Structural Equations, Treatment, Effects and Econometric Policy Evaluation." Econometrica, 73(3): 669-738.

Handouts:

• Some Helpful Mathematical Facts
• Useful Equations
• Labor Supply and the Two-Step Estimator
• Normal Selection Model Results from Heckman and Honoré (1990)
• Heckman, J. (2007). Labor Supply
• Heckman, J. (2011). Censored Regression Model
• Adding Uncertainty to a Roy Economy with Two Sectors
• Extensions of The Roy Model To Account For Uncertainty

Topic IV: Instrumental Variables in Choice Models

• Heckman, J., S. Urzua and E. Vytlacil (2006) " Understanding Instrumental Variables in Models with Essential Heterogeneity," Review of Economics and Statistics, 88(3): 389-432.
  • Handout for Heckman, Urzua and Vytlacil (2006).
  • Yitzhaki Weights as a Version of Theil Weights (1950)
• Card, David. (1999). "The Causal Effect of Education on Earnings," In Orley Ashenfelter and David Card, editors, Handbook of Labor Economics, Volume 3A. Amsterdam: Elsevier, 1999. pp. 1801-1863.
  • Handout for Card (1999).
• Imbens, G., and J. Angrist (1994) "Identification and Estimation of Local Average Treatment Effects," Econometrica 62(2), 467-75.
  • Handout for Imbens and Angrist (1994).
• Heckman, James J.and Sergio Urzua. (2010). "Comparing IV With Structural Models: What Simple IV Can and Cannot Identify." Journal of Econometrics,156(1): 27-37.
  • Handout for Heckman and Urzua (2009).
• Vytlacil, Edward. (2002). “Independence, Monotonicity, and Latent Index Models: An Equivalence Result,” Econometrica, 70(1): 331-341.
  • Handout for Vytlacil (2002).
• Heckman, James J., Daniel Schmierer and Sergio Urzua. (2010). "Testing the Correlated Random Coeffcient Model." Journal of Econometrics, 158(2): 177-203.
  • Handout for Heckman, Schmierer and Urzua (2009).
• Carneiro, Pedro, Hansen, Karsten T., and Heckman, James J. (2001). "Removing the Veil of Ignorance in Assessing the Distributional Impacts of Social Policies," Swedish Economic Policy Review, 8:273-301.
  • Handout for Carneiro, Hansen, and Heckman (2001).
  • Tables and Figures for Carneiro, Hansen, and Heckman (2001).
• Carneiro, Pedro, Heckman, James J., and Vytlacil, Edward. (2011). "Estimating Marginal Returns to Education,"American Economic Review, 101(6): 2754–2781.
  • Handout for Carneiro, Heckman, and Vytlacil (2011).
• Carneiro, Pedro, James J. Heckman, and Edward Vytlacil. (2010). "Evaluating Marginal Policy Changes and the Average Effect of Treatment for Individuals at the Margin," Econometrica, 78(1): 377-394.
  • Handout for Carneiro, Heckman and Vytlacil (2010).
• Eisenhauer, Phillip; Heckman, James J.; and Vytlacil, Edward. (2011). "The Generalized Roy Model and the Cost-Benefit Analysis of Social Programs," Unpublished manuscript, University of Chicago, Department of Economics.
  • Handout for Eisenhauer, Heckman, and Vytlacil (2011).
• Hahn, Jinyong; Todd, Petra E. and Van der Klaauw, Wilbert. (2001). "Identification and Estimation of Treatment Effects with a Regression Discontinuity Design." Econometrica, 69(1): 201-209.
  • Handout for Hahn, Todd, and Van der Klaauw (2001).
• Imbens, Guido W. and Thomas Lemieux. (2008). "Regression Discontinuity Designs: A Guide to Practice." Journal of Econometrics, 142(2): 615-635.
  • HANDOUT for Imbens and Lemieux (2008).

Handouts:

• Handout: "Index Structure and IV Weights"
• Handout: "Comparing IV to OLS"
• Handout: "Using the Marginal Treatment Effect to Organize Alternative Econometric Estimators to Evaluate Social Programs, and to Forecast their Effects in New Environments"
• Handout: Chesher, Andrew and Adam Rosen. (2012). "Generalized Instrumental Variables Models."

Topic V: Social Experiments

• Heckman, James J. (1992). "Randomization and Social Policy Evaluation," In Evaluating Welfare and Training Programs, C. Manski and I. Garfinkel, eds. Cambridge, MA: Harvard University Press. pp. 201-230.
  • Handout for Heckman (1992)
• Heckman, James J., and Jeffrey A. Smith. (1995). "Assessing the Case for Social Experiments," Journal of Economic Perspectives, 9: 85-110.
  • Handout for Heckman and Smith (1995).
• Section 9: "Randomized Evaluations" from Heckman, J. and Vytlacil, E. (2007). "Econometric Evaluation of Social Programs, Part II: Using the Marginal Treatment Effect to Organize Alternative Economic Estimators to Evaluate Social Programs and to Forecast Their Effects in New Environments," in J. Heckman and E. Leamer, eds. Handbook of Econometrics, Vol. 6. Amsterdam: North-Holland.
  • Handout for Section 9 of Heckman and Vytlacil (2007).
• Heckman, J., Hohmann, N.,Smith, J. and Khoo, M. (2000) "Substitution and Dropout Bias in Social Experiments: A Study of an Influential Social Experiment," Quarterly Journal of Economics, 115(2): 651-694.
  • Handout for Heckman, Hohmann, Smith and Khoo (2000).
• Todd, P. and Wolpin, K. (2006). "Assessing the Impact of a School Subsidy Program in Mexico: Using Experimental Data to Validate a Dynamic Behavioral Model of Child Schooling and Fertility," American Economic Review, 96(5): 1384-1417.
  • Handout for Todd and Wolpin (2006).
• Deaton, Angus. (2009). "Instruments of Development: Randomization in the Tropics, and the Search for the Elusive Keys to Economic Development," Keynes Lecture, British Academy, London, October 7th, 2008, Proceedings of the British Academy 2008 Lectures, 162, Oxford University Press, 2009, 123-160.
  • Handout for Deaton (2009).
• Imbens, Guido W. (2010). "Better LATE Than Nothing: Some Comments on Deaton (2009) and Heckman and Urzua (2009)." Journal of Economic Literature, Vol 48(2): 399-423.
  • Handout for Imbens (2010).
• Horwitz, Ralph I., Burton H. Singer, Robert W. Makuch, Catherine M. Viscoli. (1996). "Can treatment that is helpful on average be harmful to some patients? A study of the conflicting information needs of clinical inquiry and drug regulation," Journal of Clinical Epidemiology, 49(4): 395-400.
  • Handout for Horwitz, et al. (1996).
• Horwitz, Ralph I., Burton H. Singer, Robert W. Makuch, Catherine M. Viscoli. (1997). "On Reaching the Tunnel at the End of the Light," Journal of Clinical Epidemiology, 50(7): 753-755.
  • Handout for Horwitz, et al. (1997).
• Handouts:
  • Social Experiments
  • Some Evidence from Social Experiments on Disruption and Contamination Bias
  • Randomized Evaluations

Topic VI: Matching: Nonparametric OLS

• Section 8: "Matching" from Heckman, J. and Vytlacil, E. (2007). "Econometric Evaluation of Social Programs, Part II: Using the Marginal Treatment Effect to Organize Alternative Economic Estimators to Evaluate Social Programs and to Forecast Their Effects in New Environments," in J. Heckman and E. Leamer, eds. Handbook of Econometrics, Vol. 6. Amsterdam: North-Holland.
  • Handout for Heckman and Vytlacil. (2007). "Matching."
• Todd, Petra E. (1999). "A Practical Guide to Implementing Matching Estimators" Unpublished manuscript, University of Pennsyvania, Department of Economics.
  • Handout for Todd (1999).
• Todd, Petra E. (2007). "Evaluating Social Programs with Endogenous Program Placement and Selection of the Treated," In: T. Paul Schultz and John A. Strauss, eds. Handbook of Development Economics, Volume 4, Chapter 60, Pages 3847-3894. Amsterdam: Elsevier.
  • Handout for Todd (2007).
• Heckman, J., R. LaLonde and J. Smith (1999) "The Economics and Econometrics of Active Labor Market Programs", O. Ashenfelter and D. Card (eds.), Handbook of Labor Economics , (North Holland, Vol. 3), Section 8, pp 1992-2007.
• Heckman, J., and S. Navarro (2004) "Using Matching, Instrumental Variables, and Control Functions to Estimate Economic Choice Models," Review of Economics and Statistics 86(1), 30-57.
  • Handout for Heckman and Navarro (2004).
• Ichimura, H. and Todd, P. (2007). "Implementing Nonparametric and Semiparametric Estimators," in J. Heckman and E. Leamer, eds. Handbook of Econometrics, Vol. 6B. Amsterdam: North-Holland. pp. 5369-5468.
  • Handout for Ichimura and Todd (2007).
• Heckman, J., Ichimura, H., Smith, J. and Todd, P. (1998). "Characterizing Selection Bias Using Experimental Data," Econometrica, 66(5): 1017-1098.
  • Handout for Heckman, Ichimura, Smith, and Todd (1998).
• Handouts:
  • Handout for Heckman, James J. (2010). "The Principles Underlying Evaluation Estimators with an Application to Matching."
  • Handout: The Principles Underlying Evaluation Estimators, Part II: Application to Matching
  • Matching
  • Handout: Heckman, LaLonde, and Smith. (1999). "Some Mechanics on the Method of Matching." from Section 7 of the Handbook of Labor Economics, Volume 3A.
  • Handout: Heckman and Urzua. (2005). "Examples of Using Matching, Instrumental Variables and Control Functions to Estimate Economic Choice Models."
  • Handout: Heckman and Robb. (1985). "Alternative Methods For Evaluating The Impact of Interventions: An Overview."
  • Handout: Heckman, James J. "LaLonde's Challenge and Background Evidence from the Matching Literature."
  • Handout: Heckman, James J., LaLonde, Robert J., and Smith, Jeffrey. (2004). "A Simulation Study of the Sensitivity of Nonexperimental Methods to Matching and Alternative Assumptions."
  • Handout: Heckman, James J., LaLonde, Robert J., and Smith, Jeffrey. (2004). "The Economics and Econometrics of Active Labor Market Programs, Section 7."

Topic VII: Distributional Treatment Effects and Factor Models

• Fortin, Nicole, Thomas Lemieux and Sergio Firpo. (2011). "Decomposition Methods in Economics," In Orley Ashenfelter and David Card, eds., Handbook of Labor Economics, Vol. 4. Amsterdam, Elsevier. pp. 1-102.
  • Handout for Fortin, Lemieux, and Firpo (2011).
• Cunha, Flavio and Heckman, James J. (2008). "Formulating, Identifying and Estimating the Technology of Cognitive and Noncognitive Skill Formation," Journal of Human Resources, 43(4):738-782.
  • Handout for Cunha and Heckman (2008).
• Cunha, Flavio, James J. Heckman and Susanne Schennach. (2010). "Estimating the Technology of Cognitive and Noncognitive Skill Formation," Econometrica, 78(3): 883-931.
  • Handout for Cunha, Heckman, and Schennach (2010).
  • Handout from Tokyo Plenary for Cunha, Heckman, and Schennach (2009).
• Heckman, James J., Susanne Schennach and Benjamin D. Williams. (2011). "Matching on Proxy Variables," Unpublished manuscript, University of Chicago, Department of Economics.
  • Handout for Heckman, Schennach and Williams (2011).
• Aakvik, Arild; Heckman, James J. and Vytlacil, Edward. (2005). "Treatment Effects for Discrete Outcomes when Responses to Treatment Vary Among Observationally Identical Persons: An Application to Norwegian Vocational Rehabilitation Program." Journal of Econometrics, 125(1-2): 331-341.
  • Handout for Aakvik, Heckman, and Vytlacil (2005).
• Conti, Gabriella, James J. Heckman, and Sergio Urzua. (2010). "The Education-Health Gradient," American Economic Review: Papers & Proceedings, 100(2), 234-238.
  • Handout for Conti, Heckman, and Urzua (2010).
• Abbring, Jaap and Heckman, James J. (2007). "Econometric Evaluation of Social Programs, Part III: Distributional Treatment Effects, Dynamic Treatment Effects, Dynamic Discrete Choice, and General Equilibrium Policy Evaluation." in Handbook of Econometrics, Vol. 6B, J. Heckman and E. Leamer, eds. Amsterdam: Elsevier. Section 2, pp. 5145-5303.
  • Handout for Abbring and Heckman (2007).
  • Extract of Abbring and Heckman (2007).
  • Notes on Factor Models and the Hicks Lecture Model with Normal Random Variables
• Bonhomme, Stéphane. (2011). "Functional Differencing," Forthcoming in Econometrica
  • Handout for Bonhomme (2011).
• Bonhomme, Stéphane and Jean-Marc Robin. (2010). "Generalized Non-Parametric Deconvolution with an Application to Earnings Dynamics." Review of Economic Studies, 77(2): 491-533.
  • Handout for Bonhomme and Robin (2010).
• Bonhomme, Stéphane, Koen Jochmans, and Jean-Marc Robin. (2012). "Nonparametric Estimation of Finite Mixtures," Unpublished manuscript, CEMFI.
  • Handout for Bonhomme, Jochmans, and Robin (2012).
• Henry, Marc, Yuichi Kitamura, and Bernard Salanie. (2011). "Identifying Finite Mixtures in Econometric Models," Unpublished manuscript, University of Montreal.
  • Handout for Henry, Kitamura, and Salanie (2011).
• Altonji, Joseph G. and Rosa L. Matzkin. (2005). "Cross Section and Panel Data Estimators for Nonseparable Models with Endogenous Regressors." Econometrica, 73(4): 1053-1102.
  • Handout for Altonji and Matzkin (2005).
• Frühwirth-Schnatter, S. (2006). Finite Mixture and Markov Switching Models. Springer-Verlag.
• Heckman, James J. and Burton Singer. (1984). "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data." Econometrica, 52(2): 271-320.
  • Handout for Heckman and Singer (1984).
• Redner, Richard A. and Homer F. Walker. (1984). "Mixture Densities, Maximum Likelihood and the EM Algorithm." SIAM Review, 26(2): 195-239.
  • Handout for Redner and Walker (1984).
• Geweke, John and Michael Keane. (2000). "An Empirical Analysis of Earnings Dynamics among Men in the PSID: 1968–1989 Journal of Econometrics, 96(2): 293-356.
  • Handout for Geweke and Keane (2000).

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