Contents

• Pages: 3-14

iii

CONTENTS

Foreword................................................................................................. xv

Preface ..................................................................................................xvii

Chapter I

Introduction to Econometric Techniques ............................................. 1

A. The Value of Econometric Evidence.................................................. 1

B. The Advantages of Econometric Evidence ........................................ 3

1. Correlation and Causation ........................................................... 4

2. Problems in Econometric Analysis.............................................. 6

C. Research Design: Model Specification .............................................. 8

1. What Specific Question is the Expert Investigating?...................8

2. What Model Should Be Used to Evaluate the Question at

Issue? ...........................................................................................8

3. Choosing the Dependent Variable ...............................................9

4. Choosing the Explanatory Variable That Is Relevant to

the Question at Issue.................................................................... 9

5. Choosing Additional Explanatory Variables .............................10

6. Choosing the Functional Form of the Multiple

Regression Model ......................................................................13

7. Choosing Multiple Regression as a Method of Analysis........... 14

D. Interpreting Multiple Regression Results......................................... 15

1. What Is the Practical, as Opposed to the Statistical,

Significance of Regression Results? .......................................... 15

2. When Should Statistical Tests Be Used?................................... 16

a. What Is the Appropriate Level of Statistical

Significance? .......................................................................18

b. Should Statistical Tests Be One-Tailed or Two-

Tailed?................................................................................. 19

3. Are the Regression Results Robust?.......................................... 20

4. What Evidence Exists That the Explanatory Variable

Causes Changes in the Dependent Variable?............................. 20