Research Methods in

Economics
By: Haile Girma (Ass.Prof.)
Department of Economics, SLU
Email: [email protected]
 Chapter 1:The Foundations of Economic
Research
1.1. Definition of Research
 Different authors in many ways have defined the word research.
 Research commonly refers to a search for knowledge.
 Some people consider research as a movement from known to
unknown.
 It is indeed a voyage of knowledge.
 For some people on the other hand research implies an art of
scientific investigation to the state of nature or phenomenon.
 Authors are increasingly adding new names and definition for
different kinds of research.
 However, to avoid confusion and unnecessary cumbersomeness let
us confine ourselves to the definitions of research given by
selected authors.
 Cont’d
1. Hertz: “ research is original and creative activities”.
 According to him, Research is application of human intelligence
in systematic manner to problem whose solution is not
immediately available.
2. Woody: “research is activity comprises of defining and
redefining problems, formulating hypothesis or suggesting
solutions; collecting, organizing and evaluating data; making
deduction and reaching at conclusion to determine whether
they fit formulated hypothesis.
3. Klopsteg: “Research is original and creative intellectual
activity, carried out in the laboratory, the library or in the field
which endeavors to discover new facts and to apprise and
interpret them properly in the light of previous knowledge.
 But, research is not….
 Research isn’t information gathering:
– Gathering information from resources such as books or
magazines isn’t research.
– No contribution to new knowledge.
 Research isn’t the transportation of facts:
– Merely transporting facts from one resource to another
doesn’t constitute research.
– No contribution to new knowledge although this might make
existing knowledge more accessible.
 1.2. Motivation of doing research
 The possible motives for doing research can be either one or a
combination of the following:
1. Desire to get degree with its consequential benefits
 The graduate and postgraduate students are required to carryout
research project as a partial fulfillment to obtain their master and
Ph.D. Degree.
 Research is therefore, a prerequisite to complete their study.
2. Desire to get respect and promotion (to own respect in society)
 In academic and research institutions publication is crucial for
promotion and academic rank.
 “Publish or perish” is a phrase commonly used in experienced and
well-established academic institutes.
 Cont’d
3. Desire to face a challenge in solving the unsolved problem
 Concern over a particular problem initiates a researcher.
4. Desire to get intellectual joy of doing some creative work
 Doing or participation in some creative activity will give some
professional satisfaction to many individuals.
 Research will give this opportunity.
5. Directive of government:- Government some times gives
directives to its employees to carry out a particular study and
investigation for better decision-making ground. Ideally any
policy before implementation requires detail study and analysis of
its impact on different parts of the society.
6. Employment condition:- Some employers set as criteria at least
one publication in international journal.
 1.3. Types of Research
 Generally research can be classified on the basis of the following
traits.
I. On the basis of the outcome of the research: Whether the
research tries to solve a particular problem or makes a general
contribution to the knowledge, research can be
a) Fundamental Research:
 Fundamental research is also called academic or basic or pure
research.
 Such research is aimed at investigating or search for new
principles and laws.
 It is mainly concerned with generalization and formulation of a
theory.
 Cont’d
 Fundamental research is organized only for the attainment of
knowledge and truth.
 With change of time and space, it is necessary to make a change in the
fundamental principles in every branch of science; thus, this type
of research also verifies the old established theories, principles and
laws.
 In general, fundamental research is concerned with the theoretical
aspect of science.
 In other words it studies the laws of nature, with out or regardless
of the immediate application of its findings.
 E.g.,
 The Darwin Theory of Evolution, Newton’s Law of Motion , Einstein
Theory of Relativity
 Cont’d
b) Applied research
 A research aimed at finding a solution for an immediate
problem facing a society, a group or industry (business
organization).
 The results of such research would be used by either individuals or
groups of decision-makers or even by policy makers.
 While pure research discovers principles and laws, applied
research discovers their application in solving some social,
economical or any other problems.
 E.g.,
 The improvement of safety in the working place
 The reduction of wastage in the working places
 Cont’d
II. On the basis of the purpose (The reason why a research is
conducted) it can be-
a) Exploratory research (Pilot Survey)
 It is also called preliminary research.
 As its name implied, such research is aimed at discovering,
identifying and formulating a research problem and hypothesis.
 When there are few or no studies that can be referred such research
is needed.
b) Descriptive Research
 The main purpose of such research is description of the state of
nature or affairs, as it exists at present.
 In social science and business research we often use the term ex-post
facto research for descriptive research.
 Cont’d
 The main characteristic of such research is that the researcher has
no control over the variables; he can only report what has
happened or what is happening.
 E.g.
 What is the absentee rate in a particular office?
 What is the qualification of different groups of employment?
 Frequency of shopping
 Preferences of people
 Ex-post facto studies also include attempts by researchers to
discover causes though they cannot control the variables.
 Cont’d
c)Analytic research
 Analytical research goes beyond simple description of the state
of nature.
 When a researcher encounters an issue that is already known
and have a description of it, you may begin to ask “why”
things are the way they are.
 Analytical research uses facts or information already available,
and analyzes them to make a critical evaluation of the material.
 Not only describe the characteristics, but also it analyzes and
explains why and how it happened or is happening.
 The information or facts used here can be either Qualitative or
Quantitative.
 Cont’d
 E.g.,
 How can we reduce the numbers of complaints made by
customers?
 How can we expand the range of our services?
 How can we improve the delivery times of our products?
 Cont’d
d) Predictive research
 Such research goes beyond explaining why and how things
happened.
 It predicts (forecast) the possible (probability of happening
similar situation in other places.
 It tries to explain about the probability of happening similar
thing in the future.
E.g.,
 How would an increase in interest rate affect our profit margin?
 What type of packaging will improve the sales of our products?
 Cont’d
III. On the basis of the process of research: That is, on the basis of
data used in the research process research can be:-
a) Qualitative research:
 Such research is applicable for phenomenon that cannot be
expressed in terms of quantity.
 Things related to quality and kind.
Example:
 Research designed to find out how people feel or what they
think about a particular subject or institution
 Cont’d
b) Quantitative research
 Quantitative research is concerned with quantitative phenomenon.
 It is based on the measurement of quantity or amount.
 It is applicable for phenomenon that can be expressed in terms of
quantity.
 Cont’d
IV. On the basis of the environment in which the research is
carried out research can be
a) Field research
 It is a research carried out in the field.
 Such research is common in social science, agricultural science,
history and archeology.
b) Laboratory research
 It is a research carried out in the laboratory.
 These are commonly experimental research.
 Such researches are common in medical science, agriculture and
in general in natural sciences
 Cont’d
c) Simulation research
 Such research uses models to represent the real world.
 Simulation is common in physical science, economics and
mathematics.
 Cont’d
V. On the basis of the time required to complete the research,
research can be:-
a) One -time research; It is a research limited to a single time
period
b) Longitudinal research
 Such research is also called on-going research.
 It is a research carried out over several time periods.
 1.4. Research and Scientific method
 The two terms, research and scientific methods are closely related.
 Research methodology and technique are mostly different from
one science to another or can be different from research to
research.
 The philosophy common to all research methodology and
technique is called Scientific methods.
 As Pearson (1968) put it, “the scientific method is one and the
same in the branches (science) and that method is the methods of
all logically trained minds”
 Steps in scientific method
The steps in scientific methods are summarized as follows.
1. Observation: the first or initial step in the scientific method is a
minute and careful observation of the subject matter of research.
2. Recording: The next step to observation in scientific method is a
careful recording of all information (data) obtained in the first
step, i.e., observation.
3. Classification: the collected data (information) have to be
classified and organized.
 This is a serious step; according to “the classification of facts, the
recognition of their sequence and relative significance, is the
function of science”.
 Cont’d
 The classification implies systematically arranging and
organizing the recorded data on the logical basis so that they
will become viable for the analysis and to make generalization.
4. Generalization: It is an extension of general laws and principles
on the basis of the pattern exhibited by the classified material.
 This general law is known as scientific law.
5. Verification: the scientific method does not stop only at the
formulation of general law.
 The general principle must be also verified.
 The validity of scientific principles can be confirmed by
examination.
 Forms of scientific methods
 There are six primary forms of scientific methods.
1. Induction: the movement of knowledge from particular facts to
general rule or principle.
 To make generalization based on our knowledge from a particular
event or assessment.
 E.g. Socrates is mortal and Socrates is a man; therefore, man is
mortal.
2. Deduction: a movement in knowledge from a general rule to a
particular case.
 E.g. Man is mortal and Socrates is a man; therefore, Socrates is
mortal
3. Historical: historical method is a back ward movement in
knowledge to trace the cause of a phenomenon.
 Cont’d
 Darwin theory of evolution and Marx’s law of economic determinism
are example of historic forms of scientific method.
4. Comparative: This method is used for the analysis and comparison
of two contemporary (coexisting and present) phenomenon.
 It is always undertaken in order to discover new facts or relations.
 Studies of two government or political system
5. Structural: a study of what a things, what are its outline and
significant feature is a structural study (the composition of a thing)
 Anatomy is a structural study
6. Functional: in contrast to the structural method, functional method
studies the processes and their cause, that is, how and why of a
thing.
 Physiology is a good example
 1.5. The research process
 Research processes consist of a series of actions or steps, which
are necessary to successfully carry out research activities.
 The research processes consist of a number of closely related
activities.
 These activities (steps) can overlap continuously rather than
following a strictly prescribed sequence.
 The first step can determine the nature of the last step to be
undertaken.
 These steps are not separate and distinct.
 They do not necessarily follow each other in any specific order
Kothari (1990).
 Cont’d
 However, the following order of steps provides a useful procedural
guideline regarding the research processes.
1. Identification and Formulating the research problem
2. Extensive literature survey
3. Developing working hypothesis
4. Preparing the research design
5. Determine sample design
6. Collecting data
7. Execution of the project
8. Analysis of the data
9. Hypothesis testing
10. Generalization and interpretation
11. Reporting the result
1.5. Characteristics of Good Research

Clearly
Clearly defined
defined purpose
purpose &
& common
common concepts
concepts used
used
Detailed
Detailed research
research process
process
Thoroughly
Thoroughly planned
planned design
design
High
High ethical
ethical standards
standards
Limitations
Limitations addressed
addressed
Adequate
Adequate analysis
analysis
Unambiguous
Unambiguous presentation
presentation
Conclusions
Conclusions justified
justified
Credentials
Credentials
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