Methods of Economic Evaluation and Experiments Spring 2017 Course responsible Elina Lampi elina.lampi@economics.gu.se

Learning outcomes (1): After completion of the course, the student shall be able to: 1. Have a good understanding of how to use observational data to analyze economic problems. 2. Have a good understanding of stated preference methods and analyze the responses to stated preference methods with relevant econometric methods. 3. Have a good understanding of and be able to analyze an impact evaluation study.

Learning outcomes (2): 4. have a good understanding of and be able to design an economic experiment, both in the lab and in the field. 5. have a good understanding of the limitations of the methods covered in this course, and the potential limitations of individual behavior in the survey or experimental situation.

Methods and applications The red thread of this course can be summarized as below for all three parts of the course: Namely…… Different methods of applied economics Hands on applications to learn the methods (labs/experiments) Discussion of limitations of the methods

Annika´s part: The aim of the first part of the course is to provide an overview of the most common empirical methods currently used in applied economics. We start with a discussion of the evaluation problem, and then proceed to discuss randomized controlled experiments, how to evaluate ‘natural experiments’, and matching methods. The students will learn the pros and cons of the different methods, how to apply them, and what to think about when doing so.

Elina´s part (1) 1. Stated preference methods and how to use them. How to ask people´s willingness to pay (WTP) for a non-existing (new) public good or for a change in the quality of an existing good. 2. The methods we will talk about are Contingent Valuation method (CVM) and Choice Experiment (CE) method. 3. Common applications are to ask WTP for public goods, such as for new medicines, new treatments (health economics), improvements in environmetal quality e.g. in water or in air (environmental economics), and to maintain a cultural buildning or have free access to a museum (cutural economics).

Elina´s part (2) You will learn: 1. What are CVM and CE and how we can use them? 2. Econometrics behind CVM and CE. 3. To estimate willingness to pay for public goods by using CVM and CE methods. 4. Be aware of both strenghts and weaknesses of the both methods.

Christina´s part (1): Until recently, economics was widely regarded as a non-experimental science that had to rely on observation of real-world economies rather than controlled laboratory or field experiments. In the third part of the course you will learn the basics of using experiments to understand economic phenomena and get a first glimpse into behavioral economics.

Christina´s part (2): After a general introduction to the development of experimental economics we will look at three of the most prominent research areas in behavioral and experimental economics – social, risk and time preferences – and some of the most famous laboratory experiments. You will learn to understand what makes a good experiment and how an experiment is designed. In the end, we will turn to experiments in the field and how they differ from and complement the work in the lab. The aim of this part is to enable you to design your own experiment both in the lab and in the field.

Formalia (1) Examination is based on assingments for each 3 parts of the course. Annika has a lab (25 p.). Elina has a litterature review question (10 p.) and labs (30p.) Christina has a literature review question (10 p.) and an assingment where you will designing a laboratory experiment and a field experiement (25p.)

Formalia (2) You will work pairwise but you need to change your partner for each moment of the course. So you will work with 3 different partners (one for Annika´s part, one for Elina´s part, and one for Christina´s part). If problem to find a partner we will help you. But try first yourself! In total you can get 100 points from the assingnments. (25+10+30+10+25=100 points).

Formalia (3) In order to pass the course you need to: Work with 3 different partners. 2. Submit your work by e-mail for corresponding teacher in time. And send everything through ”Urkund” 3. Get at least 50% correct for each 5 assinments. But you also need to get 60 points in total out of the 100 possible points. I.e. 60 % correct in total is required for Pass. 4. For High Pass you need to get 80 points out of the max 100 points.

Formalia (4), Time for questions: Annika: 23rd January 14.00-15.00 in D32 Elina: 6th of february 14.00-15.00 in C33 Christina: 15th of February, 10.00-11.00 in C33

Formalia (5), Deadlines to submit assignments: Annika: 24th of January, at 24.00, (Midnight) Elina: 7th of February, at 24.00, (Midnight) Christina: 16th of February, at 24.00, (Midnight) You need also send your work to Urkund. Our Urkund adresses are: firstname.surname.gu@analys.urkund.se

Formalia (6), rules for submitting assignments: If you miss the deadline you will fail the whole course. You can submit the missing assingment after the course is finnished but then (so that it will be fair against those who did submit in time), it is only possible to get pass (and not high pass) for the whole course. Decide the new submission date with the corresponding teacher. The exceptions are if you get sick or have other serious reasons not to be able to submit in time. In that case, contact Elina by mail as soon as possible.