Department of Economics ECM103 Research Methods Dr Simon Burke Room 319 HumSS Building Office hours Wednesday Thursday – 11.30

2 Dr Simon Burke Main research subject: time series econometrics Current research topics: using time series techniques to identify collusion comparing the adequacy of models of financial time series determinants of student well-being book: ‘Modelling Non-Stationary Economic Time series’ Teaching: mainly mathematics, statistics, econometrics; intermediate micro and macro Other responsibilities: Director of UG Studies, School Director of International Engagement Previous Universities: Lancaster (BA Economics + Maths), Warwick (MSc Econ and research 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.

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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 the Department of Economics Women migrant workers in the UK: social capital, well- being and integration Growth and public infrastructure International migration, housing demand and access to home ownership The determinants of the location of foreign direct investment in UK regions Multinational enterprises: their private and social benefits and costs Inflation dynamics in the new EU member states: how relevant are external factors? Gender and life satisfaction in the UK Does consumption-wealth ratio signal stock returns?

What Makes Research Useful? Validity Clarity of problem Logical structure Evidence Reference to previous investigations Suitable investigative technique Generalisability Are findings very specific or can they be applied beyond the particular investigation?

Rigour and Trustworthiness Research must be rigorous Research must be trustworthy Consider these issues form the outset and when reading published research designing your research Data collected systematically? Data interpreted systematically? Clarity of purpose Is 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 example The interaction of political systems and economic prosperity

The interaction of political systems and economic prosperity: your thoughts? Why? The Arab Spring The collapse of the Soviet Union Intervention in Iraq, Afghanistan Not yet a research question It 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 prize Economic prosperity GDP, per capita GDP Growth in GDP, per capita GDP Characterisation of political system Frequency of elections Frequency of change of government Number of political parties Independence of the judiciary Democracy

Conditioning Categorical 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 …’ ‘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 you a) 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 addresses a name for your group a 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 do I 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 prosperity After 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 vaguedemocracy Economic prosperityper 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 factors Other 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 (H 1 ) Democratisation enhances growth (increases economic prosperity) ii)Size of impact. Hypothesis 2a (H 2a ) The impact of democratisation is statistically significant Hypothesis 2b (H 2b ) The impact of democratisation is economically significant iii) Comparative size of impact Hypothesis 3a, b, c (H 3a,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 (H 4 ) Democratisation does not have an immediate impact on growth v) Shape of impact Hypothesis 5 (H 5 ) 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 (H 6 ) 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 Subject Democratisation 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 is subject 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: home.aspxhttp:// home.aspx Search 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 Journal American Economic Review Applied Economics Journal of Economic Perspectives Journal of Economic Literature g) me a copy of your PPT file by Thursday October 17 th at 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,