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Welcome to Economics 140! This course is meant to introduce you to the statistical analysis
of economic data, also known as “Econometrics.” You should have taken both microeco-
nomics and macroeconomics (either the Economics 100A/B or 101A/B series, or equivalent).
More importantly, you have completed an introductory statistics course, e.g., Statistics 20,
21, 25, 131A, or an equivalent. On occasion, when it helps to explain a concept, we will
make use of calculus – which is not a pre-requisite for the course, but it is a requirement for
the Economics major. Those looking for a more theoretical, mathematical treatment of the
same topics covered in this course are encouraged to take Economics 141.
After reviewing essential concepts from probability and statistics, we turn to the heart of
the course: regression analysis. You will learn not only the meaning and properties of
both univariate and multivariate regression, but also how to test economic relationships
using real datasets and an econometrics software package. We will develop techniques to
handle common statistical problems that arise when working with economic data including
endogeneity, selection bias, mis-specification, and measurement errors. We will expand the
types of data we can analyze by exploring the topics of panel data, binary response, and
natural experiments.
General Information
• Instructor: Stephen Bianchi, 675 Evans
• Enrollment: Please see the head GSI, Katarina Jensen (548 Evans, headgsi@econ.berkeley.edu),
for ALL questions regarding enrollment.
• Email: swbianchi@berkeley.edu
• Email Policy: When you email me, please put ”[ECON140]” in the subject and ask
me questions that can be answered in a few sentences. If I find that my response will
require more than a few sentences, I will ask you to come see me during office hours.
I will reply to course related emails within 48 hours.
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Please note that you MUST attend a discussion section during the first full week of
classes (i.e., Tuesday, January 16th through Monday, January 22nd) – if you do not,
you will be dropped from the class.
Each GSI is only responsible for students who are officially registered in one of their
sections, so please do not email another GSI. However, you may go to any GSI’s office
hours. If you have a conflict and there is physical space, you may also attend your
GSI’s other regularly scheduled section – but before doing so, please discuss with your
GSI.
• Academic Honesty: Please carefully observe the UC Berkeley Campus Code of Student
Conduct, which can be found at: http://sa.berkeley.edu/code-of-conduct.
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Course Books
Required:
• James H. Stock and Mark W. Watson, Introduction to Econometrics, 2nd or 3rd Edi-
tion.
The publisher hosts a website for the 3rd edition at: http://wps.aw.com/aw_stock_ie_
3/178/45691/11696965.cw/index.html. Many study resources are available on this site
including answers to end-of-chapter questions and various practice quizzes.
Course Software
This course requires the use of Stata – an econometrics package very poular among economists.
You will be given datasets in problem sets and be asked to perform certain econometric rou-
tines. The results of your programming will be submitted as part of your answers.
The “UCB Virtual Lab” makes available Stata14 (standard edition) via a Citrix VPN. You
can download and install Citrix from: http://citrix.berkeley.edu. Log in with your
Calnet ID and password. Once into the Citrix VPN, click on the Stata14 icon. Students can
get help with Virtual Lab tools by contacting the D-Lab at http://dlab.berkeley.edu/.
You can also purchase Stata15 at: http://www.stata.com/order/new/edu/gradplans/
student-pricing/. The last time I checked, a six-month license was $45 for students.
The manual included with any version of Stata is comprehensive and the online user discus-
sion forums address just about any problem you may encounter. I will also post the short
tutorial that the textbook has provided on using Stata. There are many other full-service
econometrics packages (e.g., R, Matlab, SAS) but these will not be supported by your GSIs.
Experience with Stata can be helpful if you do other economic research (e.g., an honours
thesis) and it looks good on your job resume.
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Requirements
The course requirements include two midterms, a final, and five graded problem sets. The
course grade will be determined as follows:
• Midterm 1 (25%)
• Midterm 2 (25%)
• Final (35%)
The percentages above sum to 110%. The worst 10% of the score will not count toward your
grade. For example, if the worst score is on the first midterm, the first midterm will only
count as 15% of the total.
Problem sets: You will have about a week and a half to complete each problem set. You are
encouraged (but not required) to form study groups of up to three students – all of whom
are registered in one of the two sections of the same GSI. The group may submit a single
answer sheet with the names of all of the study group members at the top of the first page.
Everyone in the study group receives the same grade. We will use the usual 3-point “check”
system of grading problem sets.
Answers to problem sets will be collected by the GSIs at the beginning of the lecture on the
due date. No late work will be graded and, yes, that penalizes all members of the study
group. Problem set 1 will be posted after the first lecture and is due Thursday, February
1st.
Exams: There will be two in-class midterm exams on Thursday, February 15th and
Thursday, March 22nd, plus a final exam on Wednesday, May 9th from 11:30-2:30
(location TBD).
The first midterm covers the material in the lectures 1-9, and the second midterm covers the
material in lectures 10-18. The final will be cumulative, but with more detailed coverage of
the material discussed after the second midterm. I think you will be happy to hear that,
barring any abuses, all exams will be “open book.”
Dates for exams will not change and make-up exams will not be given. If you fail to show up
for a midterm, it will be treated in one of two ways. First, you may provide written, credible
evidence from an authority explaining your absence (an example is a doctor’s note or a police
report explaining the circumstances of an illness or accident, respectively). You must also
provide a phone number for the person who wrote the report so that I might contact them
for a more detailed explanation. If you meet these conditions, you will receive the same
relative score you earned on the other midterm. Alternatively, absent written and telephone
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explanations, you will receive a zero for the midterm. If you miss both midterms and yet
somehow meet these conditions for both exams, you must petition for an incomplete. But
please note that incompletes will not be granted unless you meet the University standards
and those have become increasingly demanding.
Re-grade requests for midterms must be submitted in writing to your GSI within one
week of receiving a graded exam. A detailed description of the re-grade policy will be posted
after each midterm.
Learning Goals
As part of Berkeley’s Undergraduate Student Learning Initiative (USLI), the Economics
Department has developed learning goals for the Economics major. Please see:
http://emlab.berkeley.edu/econ/ugrad/ugrad_goals.shtml.
The learning goals for this course include CT4, QT1,2,3,4.
Course Outline
The following is preliminary schedule of the topics to be covered in this class. The chapter
numbers refer to Stock & Watson, 3rd Edition. Readings that are recommended, but not
required, are indicated by a star (*).
• Multivariate Regression