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Regular version of the site
Bachelor 2020/2021

Topics in Applied Economics

Area of studies: Economics
When: 3 year, 3, 4 module
Mode of studies: offline
Instructors: Markus Gebauer
Language: English
ECTS credits: 4
Contact hours: 56

Course Syllabus


Pre-Requisites: Passing Grades in Microeconomics I and II, Macroeconomics and Econometrics. This course is an advanced course for students that want to see how economists bridge the gap between theory and empirics. To this end, there will be discussion of theory but a great emphasis on the specifics of empirical strategies and their implementation. This will be done by discussing various classical, and lesser known, papers in great detail. The instruction of the course will be different from most courses as there will be little “frontal instruction“ and a lot of interaction, not just between instructor and students, but also among students, requiring a lot of self study. Each week, we will meet to discuss previously announced papers revolving around a particular topic. Everybody will need to be able to talk sensibly about the papers and only in rare cases will there be a formal lecture with slides. This means that students will be expected to have read the papers in advance and are prepared to critically assess their content. There will be a portion of each class dedicated to the lecturer asking each student a question on the paper that is being discussed. For full reading list please refer to the uploaded Syllabus file.
Learning Objectives

Learning Objectives

  • Enable to learn, acquire new knowledge, skills, including fields other than professional
  • Teach students to identify the scientific nature of the problems in the professional field
  • Enable students to find, evaluate and use information from various sources, necessary to solve scientific and professional problems
Expected Learning Outcomes

Expected Learning Outcomes

  • Explain concepts of demand equation estimation and outline the empirical challenges therein
  • Apply discrete choice models and the econometric methodes
  • Distinguish different sources of sample selection and the ways of dealing with it
  • Able to perform structural estimation and interpret results
  • Identify challenges and apply methods of estimation of assortative matching
  • Be able to assess the Misallocation Wedges methods and results
  • Transfer insights from the misallocation wedge literature to new contexts, e.g.: Russia
Course Contents

Course Contents

  • Estimation of systems of demand equations
    This section examines the literature that tries to connect the basic models of consumer behaviour with real life data. To this end we will discuss the early expositions of the „almost ideal demand system“ satisfying many properties taken for granted in consumer theory. We then follow the development of this literature and various applications of it to ever more detailed real life data using more and more recent techniques.
  • Discrete Choice
    In most standard economic models the variables of interest are continuous quantities that can be consumed more or less. However, there is a large number of applications where the consumer must make a discrete choice like choosing a particular labour market or location. These choices can be examined econometrically with methods such as logit and probit models and their extensions. This section examines some of the underlying theory and, more importantly, various applications of it.
  • Labor Supply. Sample Selection
    In this section of the course, we will discuss various sources of sample selection bias. For instance there is self selection into different professions for people of different ability and preferences. There may also be reasons for certain groups of individuals to not enter the datasets at all. To identify these sources and their, a certain amount of insight into how data are constructed is needed as well as a good amount of statistical insight. Here we discuss papers that identify and try to adress such biases on the example of labour supply.
  • Other Applications: Food Stamps, Gift Giving, Consumer Price Indices
    This section is concerned with various applications of economic theory and empirically evaluates their implications. This can range from reduced form evidence to more structured approaches, estimating relationships derived from theory. There will also be examples of applications to the Russian Economy.
  • Assortative Matching in the Labour Market (might not be covered in class)
    The question of who matches with whom is of great economic importance. Do the most productive workers really work for the most productive companies? Should they? Are people at bigger companies paid more because they are more productive or their firm is? The literature on assortative matching tackles these issues and has made tremendous progress in measuring and in clarifying how to think about match quality. To this end, we will also look at the emergence of new, employer-employee matched datasets.
  • Misallocation Wedges (might not be covered in class)
    The idea of misallocation wedges is meant to describe and measure the impact of distortions in an economy and to suggest how much welfare is lost by the presence of these distortions. The sources of these inefficiencies can include corruption, stringent labour laws, inefficient capital markets etc.
Assessment Elements

Assessment Elements

  • non-blocking answering reading guides
    One per topic, each worth 5% of the total grade.
  • non-blocking class attendance and participation
  • non-blocking Final exam
Interim Assessment

Interim Assessment

  • Interim assessment (4 module)
    0.3 * answering reading guides + 0.2 * class attendance and participation + 0.5 * Final exam


Recommended Core Bibliography

  • Blundell, R. (1988). Consumer Behaviour: Theory and Empirical Evidence——a Survey. Economic Journal, (389), 16. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.ecj.econjl.v98y1988i389p16.65

Recommended Additional Bibliography

  • Becker, G. S. (1973). A Theory of Marriage: Part I. Journal of Political Economy, (4), 813. https://doi.org/10.1086/260084
  • Daniel McFadden. (2001). Economic Choices. American Economic Review, (3), 351. https://doi.org/10.1257/aer.91.3.351
  • Diego Restuccia, & Richard Rogerson. (2008). Policy Distortions and Aggregate Productivity with Heterogeneous Plants. Review of Economic Dynamics, (4), 707. https://doi.org/10.1016/j.red.2008.05.002
  • Dwyer Jr., G. P., & Lindsay, C. M. (1984). Robert Giffen and the Irish Potato. American Economic Review, 74(1), 188. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=bsu&AN=4510295
  • Eeckhout, J., & Kircher, P. (2011). Identifying Sorting——In Theory. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.F71FA865
  • Gibson, J., Stillman, S., & Le, T. (2008). CPI bias and real living standards in Russia during the transition. Journal of Development Economics, (1), 140. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.eee.deveco.v87y2008i1p140.160
  • Heckman, J. J. (1974). Shadow Prices, Market Wages, and Labor Supply. Econometrica, (4), 679. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.ecm.emetrp.v42y1974i4p679.94
  • Hsieh, C.-T., & Klenow, P. J. (2009). Misallocation and Manufacturing TFP in China and India. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.9B319756
  • Lucia Foster, John Haltiwanger, & Chad Syverson. (2008). Reallocation, firm turnover, and efficiency: Selection on productivity or profitability. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.61D83E23
  • McFadden, D. (1980). Econometric Models for Probabilistic Choice among Products. The Journal of Business, (3), 13. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.ucp.jnlbus.v53y1980i3ps13.29