Econometrics; Basic and applied

This book evolved from a set of extended lecture totes distributed each semester to our students under the title "A Tyro's Tryst With Econometrics." The title signaled immediately that what followed was for the newcomer to econometrics, not for the advanced student armed with statistical theory, matrix algebra, and a familiarity with the spirit of applied research. Moreover, the title hinted at pleasure awaiting the tytos. The pleasure was to come, we believed, not from learning abstract regression theory but from seeing regression theory unfold in the broader context of applied research that comprises not only regression, but also social science theory, previous research. common sense, and a lot of hard, often frustrating, work.

Thus our aim has been, and continues to be here, to expose the newcomer to the excitement of applied research. Our objective is not to transform tyros into professional researchers. Instead, our goal is to convey to them as best we can how the applied researcher goes about trying to acquire quantitative knowledge of the world out there." We recognize that applied research cat be taught, one can learn only by doing. Nevertheless, we believe that those with experience in doing applied research can impart to beginning students at least some insight into how the applied researcher tries to think through a specific research problem. In teaching, we stress that applied research is more a way of thinking about a problem than it is a mechanical application of techniques learned in a classroom. We hope we have been able to convey by the written word what we convey in the classroom by the spoken word. If we have been even modestly successful in doing so, then this is more than just another regression book. It is an introduction to the exciting, challenging world of applied research.

The book assumes that the student has had a good introductory statistics course and is familiar with the basic concepts of using sample data to estimate population param cters and to test hypotheses. Consequently, this book, unlike many econometrics textbooks, does not cover the fundamentals of statistical theory. A brief, dictionary like discussion of the basic statistical concepts used in econometrics is included for reference only. A minimum facility with differential calculus is helpful but not es sential to understanding the material. Matrix algebra is not required to master this book. However, to make the book potentially useful to a wider audience, the matrix algebra needed for single-equation regression is included in Chapter 20.