RESIT ASSIGNMENT – ECON47815
Econometric Methods
BACKGROUND INFORMATION
Overview
Congratulations! The prestigious consulting firm of Gu’s Econometric Consulting Services (GECS) has hired you. Your first task involves providing econometric advice and analysis in an ongoing legal case in Sydney, Australia. A chemical firm (ChemXcom) has been found guilty of various offences under the Federal Government’s Environment Protection and Biodiversity Conservation Act. These offences relate to illegal dumping of chemicals and the resultant pollution associated with one of the firm’s plants in a particular area in the outer suburbs of Sydney over the period 2008 to 2011. While guilt has been determined, the Court has not yet assessed damages. One aspect of damages is a claim for compensation being made by people in the affected community where the evidence being presented is in terms of the alleged impact on housing prices.
Not surprisingly in such cases, there is considerable disagreement between both sides of the case in terms of the amount of damages. Again, ChemXcom has accepted the guilty verdict and they do not intend to appeal. The case is now about quantum – how much will the firm be liable for in terms of damages?
The judge in the case is not convinced that the damages amount to $48,000 per household, which is the initial claim made by the plaintiffs. She is also not satisfied with the quality of the econometric work produced by Mooramie Consulting Group (MCG) on behalf of the defendant. She has called in GECS to act as the independent arbitrator who will report directly to her. In outlining what is required, the judge has stressed that the central question to be addressed is:
In the affected community, what was the impact on housing prices that can be attributable to the pollution and degradation of the environment caused by ChemXcom?
GECS has been provided with a report from MCG, retained by the defendant, together with the data on which the MCG’s analysis was based.
Attachment 1: MCG Report
The PDF file MCGreport.pdf contains the report submitted by MCG on behalf of the defendant.
Attachment 2: MCG Data
The Stata file MCGdata.dta stores the data used in the MCG report. You will find 142 observations on 11 variables, which include:
id: a house identifier yr: year of sale
area: area of house (square meters)
size: size of block of land (square meters) age: age of house (years)
distance: distance of house from ChemXcom plant (kilometers) rooms: number of rooms in house
brooms: number of bathrooms in house
crate: neighbourhood crime rate (annual number of offences per 1000 people) air: annual air quality index
price: real sale price of house (in ‘000s of 2010 dollars)
RESIT ASSESSMENT TASK
Produce a written report which addresses the judge’s question. As part of your report, you must:
- confirm whether you can replicate Table 1, equation (2), and equation (3) reported by the defendant’s consulting firm, MCG;
- critically evaluate their econometric approach;
- propose your own econometric approach which addresses the limitations that you have identified;
- report and discuss new estimation results based on your own approach;
- and outline any additional data that you require to improve the quality of your econometric analysis.
GENERAL TIPS
- Your report can follow any structure as long as you express your ideas clearly in academic English. You can include an executive summary if you think it will help you to communicate your ideas effectively. If you would like further guidance on how to write an empirical research report, you can consult “Chapter 19. Carrying Out an Empirical Project” in the required textbook for this module, i.e., Introductory Econometrics (7th ed.) by Jeffrey M. Wooldridge.
- In your critical evaluation and econometric analysis, you should focus on issues that enable you to demonstrate your understanding of the content taught in this module. For example, you can consider whether the MCG’s justification for their model specification is tenable given the algebraic and statistical properties of the OLS estimator; whether the MCG has paid due attention to omitted variable bias; and whether the MCG has followed an appropriate approach to hypothesis testing.
- Your additional data requirements must be stated as precisely as possible. For example, you must not simply write that you require an instrumental variable: You must name what instrumental variable you have in mind, what you will use it for, and explain why you expect it to be relevant and exogenous.
- Please be reminded that the MCG report is not a model answer to this assignment: The judge is not satisfied with their report.
- Please note that the MCG report is different from the CCG report that accompanied the main assignment for the present academic year (2021/22).
Your completed assignment must be uploaded to ULTRA no later than 11:59am (UK time) on 31 August 2022.
A penalty will be applied for work uploaded after 11:59am as detailed in the Programme Handbook. You must leave sufficient time to fully complete the upload process before the deadline and check that you have received a receipt. At peak periods, it can take up to 30 minutes for a receipt to be generated.
Overall word limit: 1000 SUBMISSION INSTRUCTIONS
Assignments should be typed, using 1.5 spacing and an easy-to-read 12-point font. Assignments and dissertations/business projects must not exceed the word count indicated in the module handbook/assessment brief.
The word count should:
- Include all the text, including title, preface, introduction, in-text citations, quotations, footnotes and any other items not specifically excluded below.
- Exclude diagrams, tables (including tables/lists of contents and figures), equations, executive summary/abstract, acknowledgements, declaration, bibliography/list of references and appendices. However, it is not appropriate to use diagrams or tables merely as a way of circumventing the word limit. If a student uses a table or figure as a means of presenting his/her own words, then this is included in the word count.
Examiners will stop reading once the word limit has been reached, and work beyond this point will not be assessed. Checks of word counts will be carried out on submitted work, including any assignments or dissertations/business projects that appear to be clearly over-length. Checks may take place manually and/or with the aid of the word count provided via an electronic submission. Where a student has intentionally misrepresented their word count, the School may treat this as an offence under
Section IV of the General Regulations of the University. Extreme cases may be viewed as dishonest practice under Section IV, 5 (a) (x) of the General Regulations.
Very occasionally it may be appropriate to present, in an appendix, material which does not properly belong in the main body of the assessment but which some students wish to provide for the sake of completeness. Any appendices will not have a role in the assessment – examiners are under no obligation to read appendices and they do not form part of the word count. Material that students wish to be assessed should always be included in the main body of the text.
Guidance on referencing can be found on Sharepoint.
MARKING GUIDELINES
Performance in the summative assessment for this module is judged against the following criteria:
- Relevance to question(s)
- Organisation, structure and presentation
- Depth of understanding
- Analysis and discussion
- Use of sources and referencing
- Overall conclusions
The word count should include all the text (plus endnotes and footnotes), but exclude diagrams, tables, bibliography, references and appendices. Guidance on referencing can be found on Sharepoint.
PLAGIARISM AND COLLUSION
Students suspected of plagiarism, either of published work or the work of other students, or of collusion will be dealt with according to School and University guidelines.
Your assignment will be put through the plagiarism detection service.
END OF ASSESSMENT
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