Doing Research in Economics Part I

Moch.Muslich Mustadjab University of Brawijaya Malang

POINTERS
What is research? The research process in economics Surveying the literature Writing as a tool for economic research Writing as a product of economic research Critical reading Theorising Locating data Manipulating data Empirical testing Communication of results
2

1. What is research?
Research is the creation of new valid knowledge, i.e. an extension of the research frontier Research is based upon the existing up-to-date knowledge in the field Knowledge is more than data or information it is structured information Knowledge is created by constructing a line of arguments
An argument is an assertion or a claim supported by reasons or evidence

The construction of knowledge

Scholars create knowledge by constructing competing arguments using the following tools:
Mental Processes thinking about an argument Oral Discourse verbalising the argument Diagram Techniques illustrating the argument Mathematic Techniques manipulating equations to test the logic of the argument Writing to present and spread the argument

How are arguments evaluated?

What are the reasons behind the argument? Does the argument make sense? Why or why not? Is the logic flawed? What are the underlying explicit and implicit assumptions? Are they flawed? How critical are the assumptions, i.e. would different assumptions lead to different conclusions? What is the empirical evidence? Does it support the conclusion? In light of the reasons and evidence provided, is the argument persuasive? If so, the argument is valid until it is invalidated by new arguments.
5

The scientific method

Select a scientific problem or question Apply a theory to derive hypotheses about the problem or question Test the hypotheses by comparing its predictions to evidence from the real world If a hypothesis fails the test check the line of arguments and if it is OK reject it If you cant reject a hypothesis you complete your line of arguments
6

2. The research process in economics

Develop a well defined research question Survey the literature in the field Define a clear purpose Select a theory proper for the research question Develop hypotheses Test your hypotheses Interpret your results and draw conclusions Communicate your research
7

The objective of a research project

is to analyse some aspect of a significant issue or problem

Step 1: Defining the scope of the research

What is the research topic? What is the research question? What is the tentative research hypotheses? What is the current knowledge, i.e. where goes the research frontier? What is the purpose?

What characterises a good research question?

Problem-oriented Analytical Interesting and significant Amendable to economic analysis Feasible, given the time and resources available

10

Strategies for selecting research questions (1)

Pick a general topic area that interests you, ideally one in which you have some background Start reading the literature, not merely to see what has been done, but also to identify what research questions remain to be answered or what problems remain to be solved.
11

Strategies for selecting research questions (2)

Select a promising from what you have found in the literature:
Could an interesting previous study be applied to a new place or time? Are there conflicting findings on some question, which you might try to reconcile? Studies often conclude suggesting questions for future research. The literature survey may reveal gaps in the current knowledge that you can explore.
12

Step 2: Surveying the literature

What is currently known? What has been discovered to date on a given topic? Objective: to identify and become familiar with the major studies that have been published on a topic Start with the most recent publications and work backwards to the roots
13

Step 3. Selecting one theory

Based upon your literature survey you must choose one theory, which is relevant for explaining your research problem Motivate your choice Never spend time on long presentations of alternative theories instead give references to literature, where competing theories are presented
14

Step 4: Analysing the problem

The theoretical analysis of the research problem, is the process, where theory is applied to shed light on the problem:
What are the essential concepts comprising the problem being analysed? How are these essential concepts related? What do these relationships imply?

The result of this analytical process is the research hypothesis (hypotheses). A research hypothesis is the proposed answer to your research question. Hypotheses are derived from economic theory (and earlier empirical research)

15

Step 5: Testing your analysis (1)

The scientific method in economics is strongly dependent upon empirical testing Empirical testing implies comparing the predictions of theory, i.e. the hypotheses, with appropriate real-world evidence You must decide how you will go about to test your hypotheses, i.e. decide your research design, which involves
1. Finding a good, large and relevant data set, and 2. Selecting an econometric method

16

Step 5: Testing your analysis (2)

Key questions:
How to choose an econometric method, which produce the best possible and most reliable results? How to adequately test the hypotheses?

Remember that a hypothesis is either rejected or not rejected. It is never accepted! If you can not reject a hypothesis, then the theoretical proposition is provisionally accepted until it eventually is rejected
17

Step 5: Testing your analysis (3)

If a hypothesis is rejected then one must ask the following questions:
Is there something wrong with the theory? Is there something wrong with the data? Is there something wrong with the econometric method?

If you find that something is wrong you have to retake the process, otherwise you continue to present your results in the thesis

18

Step 6: Interpreting the results and drawing conclusions (1)

What are the results of the empirical testing of the research hypothesis? Are they consistent with the predictions of theory? Are they consistent with the results form earlier empirical research? Are there any problems (multicollinearity, heteroskedasticity, etc.) with the econometric testing that need to be corrected?

19

Step 6: Interpreting the results and drawing conclusions (2)

Are there shortcomings with the econometric method that limit or weaken the results? Given the answers to the above questions: what can be concluded about the results? To what extent are they in line with the hypotheses? What can be concluded about your analysis and about your research question more broadly?

20

What is good research?

Good research, is research that follows the scientific method, wherever the results lead, even if they reject one or several hypotheses A research projects that rejects a hypotheses is not failed because it still advances our knowledge in this case by eliminating one hypothesis as an explanation to the research problem

21