ECO433 Empirical Strategies for Causal Analysis

• Topics

  In most of economics, marketing, and business management, we are interested in causal relationships between variables, rather than mere correlations. For example, it is not the correlation between marketing expenses and sales that is of interest, but the effect of increasing marketing expenses for a product on the sale volume of the same product. Similarly, we are interested in understanding, for example, the causal effect of an environmental policy on pollution, human behavior, or business revenue rather than how these measures correlate. In this course, we study methods for estimating and identifying such causal effects.

  First, the course provides a brief review of basic regression techniques. Second, we introduce the topic of causal analysis. We will define causal effects based on the potential outcomes framework, encounter the fundamental problem of causal analysis, and discuss what separates association from causation. In the third part of the course, we discuss designs and methods for data from observational studies including instrumental variables, difference-in-difference, event study design, regression discontinuity design, and kink design. Examples from the literature and step-by-step tutorials offer hands-on experiences in utilizing the methods.

  Preliminary course outline:

  • Short review of basic regression techniques (inference, asymptotics and dummy variables).
  • Causal inference using potential outcomes.
  • Randomized experiments.
  • Regression and causality.
  • Instrumental variables.
  • Fixed effects and panel data.
  • Differences-in-differences and event study design.
  • Regression discontinuity design.
  • Kink design.

• Learning outcome

  Knowledge 

  Upon completion of the course, the student…

  • masters different methods for causal analysis
  • understands how empirical methods can be used for testing the implications of theoretical models and interpret the estimation results
  • recognize the assumptions necessary to estimate causal effects

  Skills

  Upon completion of the course, the student…

  • is equiped with the intuition and skills necessary to understand and to apply methods of causal analysis to actual observational and experimental data
  • can formulate a research questions
  • is able to critically assess reports discussing associations between variables and interpret causal effects
  • can write and run do-files with relevant commands and produce tables and figures in R/STATA

  General Competence

  Upon completion of the course, the student can…

  • independently estimate causal effects, for instance, as a part of a master thesis or in future professional careers

• Teaching

  Plenary lectures, labs sessions, term paper and presentation (in groups).

• Required prerequisites

  We assume familiarity with linear regression at the level of the courses ECN402, or equivalent.

• Compulsory Activity

  None.

• Assessment

  The final grade will be based on a term paper, including a presentation, to be solved individually or in groups of 2 students (50%), and a final individually written digital school exam (3 hours) (50%). The term paper and exam must be written in English.

  The term paper must be submitted in the last week of the teaching term (before the exam weeks).

  Note that students lose the right to formally appeal the grade of the term paper as it contains both an oral and a written component.

• Grading Scale

  Grading scale A - F.

• Computer tools

  R, STATA

• Literature

  Angrist and Pischke (2014). "Mastering Metrics - the Path from Cause to Effect", Princeton University Press.

• Permitted Support Material

  All written support material permitted (category III) 

  Calculator 

  One bilingual dictionary (Category I) 

  All in accordance with Supplementary provisions to the Regulations for Full-time Study Programmes at the Norwegian School of Economics Ch.4 Permitted support material https://www.nhh.no/en/for-students/regulations/https://www.nhh.no/en/for-students/regulations/ and https://www.nhh.no/en/for-students/examinations/examination-support-materials/https://www.nhh.no/en/for-students/examinations/examination-support-materials/