Managerial Economics Empirical Research The objective of this assignment is to give you an introduction into conducting empirical research and presenting the results of that research in a professionally written paper.
To carry out this research, you will identify an economic relationship (or a demand equation) between variables that are interesting to you. In your paper, you will describe this relationship and present a lucid argument for the importance of a better understanding of this relationship. And then, collecting appropriate data, you will empirically estimate this relationship along with all of the appropriate goodness of fit tests and statistics. Finally, you will analyze and report the results of your empirical estimation with particular emphasis on how these results are important and useful for a manager of a business enterprise or an economic agent faced with a choice. Your final report must contain the following sections:
a. Brief Introduction – Discuss and flesh out the motivation for the economic relationship you are estimating in this paper. While you do not have to go into lengthy discussions about the underlying economic theory, it should be sufficiently detailed so the relationship you are estimating is made clear to the reader. In this section, you should include a short discussion of the literature. Be sure to tell a story: why do you think your independent and dependent variables are related? While it does not need to be exhaustive, pick three to five papers to frame your research and show how it fits in with prior research. [One way to do this is to tie your hypotheses with prior scholarly research.]
b. Data Description – Give a brief discussion of the data and how/where they were collected.
At the minimum, you should note the time range of the data, scales of the data (i.e., data in millions of dollars or thousands of tons, etc.), and any notable events that may be applicable to your data set (such as change in corporate ownership or natural disasters, etc.). Also, you should describe the institutional setting of your data. (E.g., you should discuss the business with an eye towards how some unique industry practices might have an impact on the specific data that you had collected.) Also include a table of basic descriptive statistics for your data. Your description of the data should be aided by carefully drawn, well-labeled charts and figures of your data, and summary statistics of your data.
c. Regression Model and Results – Carefully develop your regression model. You must support your model with a “story” of why the right hand side variables you include are important and/or with the support of the relevant economic theory (including your hypotheses). Report your regression results in an equation form (see the textbook for how this is done) and in table form. Be sure to report all relevant statistics: coefficient estimates, standard error, R 2 , various test statistics, etc.
d. Discussion and Diagnostic Tests – Carry out all appropriate “goodness of fit” tests and briefly discuss the “fit” of your regression equation. Which form is the preferred: linear or log-linear? Explain your conclusion. Finally, carefully describe what your empirical results are telling you about your hypothesized economic relationship that you had outlined in part a.
e. Conclusion – What does your regression tell you about the demand in the industry? What more can be done in the future?
While there will not be a hard page limit for this paper, overall, this mini report should be ten to twelve double spaced pages long with 1” margins, not including tables and figures.
Please keep in mind that the objective of this mini project is to get your hands dirty working with a data set that is interesting to you. As such, we are not looking to break new theoretical ground – just come up with a simple economic relationship and model it using a simple yet robust regression.
Style requirements: please use either APA or Chicago/Turabian citation styles. For additional citation information, see a librarian or the library’s website.