How to read structural modeling papers in economics?

For the purpose of a research project, I have been reading a lot of literature on locational equilibrium sorting in public economics. While the topic is fascinating, it is easy to get lost in piles of papers without understanding how they unify under the same overarching theme. Since reading structural papers is likely to be a challenge for many economics PhD students, I thought it might be useful to share my thoughts on how to do it effectively.

The purpose of reading others’ papers is not to produce a thorough summary of their work but to critically assess the status quo of the literature and what you can contribute. I have found the following steps useful for achieving this goal.

Step 1: Bird’s Eye View

Start with the review papers. If the topic is well researched, it should have a summary paper (look for Journal of Economic Perspectives/Journal of Economic Literature/handbook chapters). Focus on the fundamental assumptions made in each class of models. Make a list of papers for further reading based on the bibliography of the review paper.

Step 2: Divide and Conquer

For each paper on the “to read” list, read its bare bones and understand the key message. Clearly outline the model assumptions (and whether they are made as abstraction or due to data limitation), data availability, and empirical approach.

Step 3: Say it in Your Words

After you feel you have a good understanding of the class of structural models, try to synthesize the papers by describing them in writing. Focus on how they are linked to each other, and critically assess the pros and cons of each approach.

Step 4: Make the Link to Your Research

By the end of step 3, you should have a fairly clear understanding of which approach (if any) is best suited to your own research, and how your research contributes to the existing literature.

 

My Thoughts on Presenting Preliminary Research

A few weeks ago I presented a new research project to a few faculty members. I was looking for feedback on the appropriate structural model that can be used to explain commuting and residential choice patterns in a household survey. The following is what I learned from the presentation.

  1. Be clear about what feedback you are looking for. Say it right at the beginning. When your work is in preliminary stage, there are usually concerns from all aspects — data, identification, theoretical framework, context, etc. Try to focus on the aspect that matters the most to you for now. This will make your presentation more structured and enable your audience to give more useful feedback.
  2. Know what you have to cover in your presentation and what you can skip. For example, if your purpose is to identify the right theoretical model for your research question, do not dwell on the data for too long. Address questions that are relevant, and leave the questions that stray too far from your theme “to future discussions”.
  3. When you are presenting a model, be clear about the assumptions. Which assumptions are fundamental to the workings of your model and the interpretation of your results? Which assumptions are necessary due to data limitations? Which assumptions are an abstraction and can be refined? Thinking over these questions also helps you to understand different models better.
  4. Do not put unnecessary information on your presentation slides. Slides are a form of visual aid — they make your speech more effective instead of replacing you the speaker. If you find yourself staring at a slide with too many equations thinking “it’s probably gonna be fine, I’ll just use it as reference”, then you probably should make it more concise.
  5. Anticipate your questions as much as you can. I usually make draft slides a couple days before the actual presentation, and go over the slides from an outsider’s perspective (or whoever will be at your presentation, if you know them well). If a particular line seems confusing, I revise the wording on the slide or think of alternative ways to present the same idea.

Hope this is useful.

Weekly NBER Digest 3/6/16

This is the second post in my weekly NBER digest series.

  1. Bertrand and Duflo summarize the field experiments on discrimination.Dynamics of discrimination and ways to undermine discrimination seem to be promising future research areas.
  2. Dinkleman and Mariotti investigate how circular migration from Malawi to South Africa helps to improve the human capital in origin communities. Using spatial variation in migration costs and two policy instruments, a removal of migrant quota and a ban on migration, they find that after twenty years of the shocks, “human capital is 4.8%-6.9% higher among cohorts who were eligible for schooling in communities with the easiest access in migrant jobs.”
  3. A new working paper by Hummels, Munch, and Xiang reviews the existing literature on the labor market impacts of offshoring.

Weekly NBER Digest 2/20/16

This is the second post in my weekly NBER digest series.

1.What can we say about optimal trade policy using heterogeneous firms theory?

Costinot and coauthors use the classic Melitz (2003) model of heterogeneous firms trade theory to derive optimal tax levels at the micro (firm) level. They find that optimal import taxes discriminate against the most profitable foreign exporters, while optimal export taxes are uniform across domestic exporters.

Relative to another recent paper by Costiinot, Donaldson, Vogel and Werning (2015), the assumption of monopolistic competition (rather than perfect competition) in this paper leads to conclusions that are exactly the opposite. More generally, this paper is part of the trend in international trade research to connect traditional macro theories to micro data regularities.

2. How to evaluate the impact of international competition on firm performance?

This is not a new topic, but De Loecker and Van Biesebroeck highlights two aspects that are not well addressed in previous research. First, the impact of international trade on market power and productive efficiency should be studied in an integrated framework. Second, trade liberalization has the potential to increase competition by enlarging the relevant market, but this effect is not well understood. The discussion on the relevant market definition in the trade context is especially insightful.

Development economics in a developed country: how do poor Americans save?

This recent episode of NPR’s planet money talks about the financial lives of poor Americans. A few practices mentioned in the article, such as group lending, private lenders, and high interest rates for loans, are strikingly similar with what poor people do in developing countries in Africa and Southeast Asia.

This resemblance leads me to think whether ideas and methodologies in development economics can be (more extensively) applied in developed country settings. Classic models in development economics such as health-based poverty trap and credit constraint can be easily applied to study the causes of poverty in a developed country setting. Comparative studies of poor individuals in developed vs. developing countries can shed light on the impact of institutions, governance, and infrastructure on addressing poverty.

The data mentioned in this episode are pretty amazing — 235 poor households across America tracked over a year with high frequency financial diaries. I bet interesting research based on this data is on the way.

Weekly NBER Digest 2/14/16

I decided to start a series of weekly blog posts on the new NBER working papers on development economics, labor economics, and international trade that I find interesting. In the past few months, I have experienced the excitement of finding an interesting research question, going through the empirical methodology to answer the question, cleaning data, and then figuring out there is not enough variation to answer my question (due to the contextual nature of the question). Now I am opening myself up to new ideas, and my NBER digests will serve this purpose as well.

1. How does taxation affect growth through corruption?

This working paper builds an endogenous growth model to examine the relationship between taxation, corruption, and economic growth. Taxes have disincentive effects on entrepreneurs, but also provide them with public infrastructure. Political corruption governs how efficient tax revenues are translated into infrastructure. The model predicts an inversed-U relationship between taxation and growth, which is consistent with data from the Longitudinal Business Database (LBD) at the US Census Bureau.

This paper is an example of combining macro modeling with micro empirical analysis to address an interesting question.

2. Are trade policies no longer important?

This working paper by Goldberg and Pavcnik describes the declining research interest in assessing the impact of trade policies and reasons for this decline, and suggests future areas of research. A lot of useful insights. As an example,

The variation in trade policy across cross-sectional units and time is only helpful for identifying the effects of trade policy in the presence of some type of friction and/or heterogeneity in exposure to policy change. … the main limitation of relying on differential exposure of economic agents to trade policy to identify its causal effects is … that this approach by its nature will generally reveal only the relative and not absolute effects of a policy change. The latter require a theoretical framework within which the relative effects can be interpreted.

2015 年终总结

今年是我在美国第一次真正意义上过感恩节和圣诞节。我们认认真真地把礼物摆到圣诞树下,认认真真地拆开给彼此的礼物。看到对方欣喜的表情,心里觉得很温暖。

不知不觉,又一年过去了。

这一年对我来说,是充满戏剧性也充满成长的一年。学业上,我感受到了学术研究的挑战性,也明白了过度的完美主义只能创造焦虑而不能解决实际问题。生活上,一段感情的结束和另一段的开始让我明白了不是所有幸福的开始都有美满的结局,真正长久的感情需要个人的成熟作为基础。

事事都有两面。这一年的种种戏剧性让我学会了如何在迷雾中保持自己的方向。年初的时候我在手机里装上了Insight Timer的app, 每天早上冥想5分钟,聆听内心的声音,增进对自己的了解,也更能看清他人的喜乐。学业上的焦虑令我和师兄师姐增进交流,更加明白PhD是个不断超越自己的过程,享受旅途和追求结果一样重要。

这一年,我重拾声乐这个爱好,在Duke开始跟一位老师学习歌剧演唱。学期最后我竟然能稳稳当当地唱到B minor,在几十个人面前表演也不会腿脚打颤,想想也是不小的成就。

这一年,我开始练习普拉提(pilates),坚持一周练习一到两次。这项刚柔并济而充满美感的运动让我变得更轻盈,更有活力,也更自信了。在此鼓励大家尝试!

好友们各有各的生活:有的在世界各地飞来飞去忙事业,有的找到了自己的另一半幸福地安顿下来了,有的还是浑浑噩噩不知每天在忙什么。我这一年最大的感触就是: 单纯的比较是毫无意义的。明白自己想要什么,而且勇敢地去追求,这样才能得到真正的幸福。工作与爱情都是如此。

最后祝大家新年快乐,在2016心想事成!