Universita Faculty of Economics

s Indonesia and Business

Master of Economic Planning and Development Policy

SYLLABUS
APPLIED ECONOMETRICS
FIRST SEMESTER 20/21

Lecturers and Tutors

No Lecturers Tutors
.
1 Djoni Hartono
2 Rus’an Nasrudin
3 Jahen F R
4 Muhammad Hanri
5 Muhammad Halley Yudhistira

Subject Code ECEM801101

Subject Title APPLIED ECONOMETRICS
Credit Value 3
Year/Semester 2019/2020, Term 2
Day/Hour -
Subject Type Compulsory Subject
Pre-requisite -
Course This is a master level of applied econometric course. The objective of the course is to
Description equip students with a wide range of experimental and quasi-experimental technique of
modern econometrics. The lectures emphasize econometrics as a causal inference tool.
Topics include an introduction to causal inference, Rubin’s counterfactual framework,
followed by a review of the basic OLS (Ordinary Least Square) and its usage for causal
inference and sets of quasi-experimental techniques. The course uses Stata software,
hence coding skills is an advantage when enrolling this course.

There are five main textbooks used in this course:

A. Angrist, Joshua D., and Jörn-Steffen Pischke. Mastering'metrics: The path from cause
to effect. Princeton University Press, 2014.

B. Angrist, Joshua D., and Jörn-Steffen Pischke. Mostly harmless econometrics: An

empiricist's companion. Princeton university press, 2008.

C. Cameron, A. Colin, and Pravin K. Trivedi. Microeconometrics: methods and

applications. Cambridge university press, 2005.

D. Cunningham, Scott. Causal Inference: The Mixtape. 2018.

E. Wooldridge, Jeffrey M. Introductory econometrics: A modern approach. Nelson

Education, 2016.

Subject Learning Course Objective:

Outcomes The objective of the course is helping student in understanding the concept of causal
inference in econometrics and its application with empirical data. Students are

1
 expected to have solid background in statistics, matrix, and economics theory. The
course provides theoretical groundwork of linear models with some flavor of recent
developments in the econometrics theory. Students are expected to understand in
applying econometrics to several applications such as public policy, public finance,
monetary theory, international trade, international finance, etc. The objectives of the
course include:
1. Providing students general introduction to econometrics theory and its
applications
2. To distinguish correlation and causation in econometrics.
3. Giving students the tools to identify and analyze strengths and weaknesses of
specific econometrics results.
4. Giving students understanding how to carry out an empirical analysis using
econometrics
AACSB Learning Goal (LG) and Learning Objective (LO):
LG and LO to be assessed:
a. LG : Analytical Skill (AS): Students are competent in quantitative and
qualitative methods for analyzing economic issues
LO: Students are able to apply basic quantitative methods by using appropriate
tools (LG AS – LO1)
[1] Students are able to choose relevant economic data for analyzing
specified economic issues
[2] Students are able to choose appropriate quantitative research methods
[3] Students are able to have correct interpretation of the result from the
chosen method
LG and LO for Teaching and Learning Activities (TLA):
b. LG : Critical Thinking (CT): Students are able to demonstrate critical and
integrative thinking in policy design
LO: Students are able to provide policy recommendations to solve economic
problem (LG CT – LO1)
[4] Students are able to identify problems
[5] Students are able to analyze problems

Subject Synopsis/ Session Topics Subtopics Readings

Indicative Syllabus 1 Philosophy and - What is econometrics? A2, D1, C3
Introduction to - What is regression?
Econometrics - Three types of data
- Examples and recent
application especially in
policy making in Indonesia

2 Regression theory - Population regression theory A2, B3.1, D3, C4

and CEF (orthogonality
assumption)
- Regression justification
theorem I, II and III
(tentative)
3-4 Ordinary least - Least square formula D3, E2, B3
square and its - Goodness of fit
properties - Distinguishing implication of
using OLS property and
orthogonality assumption
5 Inference and - Expected value and variance D3, A1, B3
hypothesis testing of OLS estimators (standard
error)
- Robust standard error
- CLT and Slutsky Theorem
- Hypothesis testing in OLS
6 OLS and causal - What is counterfactual B2, A1, D5, C2
inference outcome framework
- Obtaining exogenous X

2
 - ATE and its interpretation
- Balance test
7 Omitting variable - Short and long version B3, A2
bias formula and regression
how to use control - OVB derivation
- What is controlling for
means?

8 Recovering - CIA theorem or selection-on- B3, A2

unbiassed observables model
parameter: getting - DAG
good controls - Application: Return on
education regression

9-10 Recovering - Instrument concept, A3, A4, D8

unbiassed exclusion restriction and
parameter: Wald Formula
Instrumental - IV theorem
variable - First stage relevance and
strength
- IV interpretation and LATE
11 Recovering - Panel data estimate B5, D9
unbiassed - LSDV or within estimate
parameter: Panel concept
Data Fixed-Effect - Its relevance for time
invariant omitting variable
bias
12 Recovering - Parallel trend assumptions A5, B5, D10
unbiassed and identification using
parameter: Double double difference
difference - DD Formula
regression - Granger placebo test and
parallel trend test
13 How to use - Making sense the number Paper (TBA)
regression - Cost-benefit analysis
estimates for
policy discussions
14 Review -
Final Examination
Teaching/Learning This course consists of 14 sessions, with each sessions is for 150 minutes. Each session
Methodology will be filled with theoretical concept in practical and popular approach as an
introduction. Students are also given an example of public policy cases/issues that can be
analysed using econometric methodology that is being discussed.

To sharpen the student insights and understanding of empirical studies, this course will
also give computer laboratories session in 5 sessions @tp ad 120 minutes at a computer
lab that has been provided. The Stata software will be used. This course will use exercise
approach with real public policy case to make it more applicable. If possible the students
expected to bring a Laptop/Notebook in each session.

The Evaluation of the course consists of a midterm test (35%), final test (35%),
Laboratory assistant (10%) and paper (20%). Two papers should be submitted, one
paper should be submitted on the midterm test and the other should be submitted on the
final test. Each paper has to address the application of econometric methods for
analyzing public policy)

Participation:
Individually, each student is required to participate actively in teaching and learning, in
the form:

3
 1. Ask questions in accordance with the topic.
2. Preparing to answer questions.
3. Discuss issues related to the topic.
To be eligible, students must read textbooks and other materials provided.
Attendance:
Minimum 80% of Total Lecture:
1. A maximum of 3 (three) times absent, for no reason.
2. Students who came 15 minutes after class begins is considered not present.
Assessment Method Percentage
Description of
evaluation*
Individual Assessment
Assignment (2X) 30%
Mid Term Examination 35%
Final Examination 35%

Total 100%
Reading list for REPLICATION
replication and
reading R1. Sparrow, Robert, Asep Suryahadi, and Wenefrida Widyanti. "Social health insurance
for the poor: Targeting and impact of Indonesia's Askeskin programme." Social science
& medicine 96 (2013): 264-271.
R2. Bedi, Arjun S., and Noel Gaston. "Using variation in schooling availability to
estimate educational returns for Honduras." Economics of Education Review 18.1
(1999): 107-116.

READING
Duflo, Esther. "Schooling and labor market consequences of school construction in
Indonesia: Evidence from an unusual policy experiment." American economic review
91.4 (2001): 795-813.

Pradhan, Menno, Daniel Suryadarma, Amanda Beatty, Maisy Wong, Arya Gaduh,
Armida Alisjahbana, and Rima Prama Artha. 2014. "Improving Educational Quality
through Enhancing Community Participation: Results from a Randomized Field
Experiment in Indonesia." American Economic Journal: Applied Economics, 6 (2): 105-
26.
Plagiarism Students should maintain originality and respect intellectual property rights. Therefore,
students should avoid conducting any act of plagiarism when doing written assignments
(if any), which may take a form of short individual / group paper and / or summary.
The followings are acts of plagiarism:
 Copying paragraphs, sentences, a single sentence, or even a significant part of a
sentence directly without enclosing them in quotation marks and appropriately
footnoted;
 Using and / or developing other’s ideas found in printed materials or film elsewhere
without explicitly referencing them to the respective author or the source of the idea.
Plagiarism is a serious infringement of intellectual property rights. Any assignment that
contains presumed plagiarism will be marked 0 (zero).