Semester ProjectThe purpose of this project is for you to gain experience in applying methods taught in this class to a real data set of interest to you. The project will simulate the real world practices of defining research questions, identifying variables, producing data, analyzing data, writing a report, and evaluating peers. Each of these skills is critical to any career path you may choose.We utilize multiple regression to complete the project, a topic that is introduced in the course later in the semester. See the following links for a brief introduction to the project, and simple and multiple regression analysis.For the final project, you should work alone. The purpose of the project is for you to gain experience in applying the methods taught in the class to a real data set of interest to you.ObjectivesAt the end of this project, you will be able to:define a research question and define appropriate variables to measure on a topic that you care aboutdecide on an experimental designgather and analyze original data (rather than data prepared for you) on an issue of interest to youprepare an appropriate reportprovide constructive, thoughtful feedback to peers on their projectsProject SuggestionsConducting an empirical analysis of economic data can be rewarding and informative. The first step in conducting an empirical analysis is choosing the topic you want to study and, within that topic, the specific question or questions you will investigate. Although there is not a single best way to choose a topic, the following suggestions might be useful.Pick a topic that you find personally interesting, ideally one about which you already have some knowledge. The topic might be related to your career interests, summer work you did, employment experience of a family member, or something of intellectual interest to you. Often, a specific policy problem, a personal decision, or a business issue raises questions that can be addressed by an empirical study.Make the question that will be the main focus of your study as specific as possible. The more narrowly the question relates to a measurable causal effect, the easier it will be to answer.Check the related literature. You might find published studies on topics closely related to yours. Use previous work to give you ideas about data sources and about what questions have not yet been answered.Choose a question that can be answered using the available data. Although the question you originally pose might not be answerable using available data, the data might support the analysis of a related and equally interesting question.Share your topic on the discussion board. If you find your topic interesting, then the odds are that others will too, and an instructor or classmate might suggest an angle that you have not thought of.As shown in the table below, the course project consists of 6 checkpoints that lead up to, and include the final report.Project FormatThis project relies on multiple regression analysis to analyze a data set that is of interest to you. The final report for the project should be a 5-10 page single-spaced paper that describes the questions of interest, how you used your data set to analyze these questions with details on the steps you used in your analysis, your findings of your question of interest and the limitations of your study. Specifically, your report should contain the following:Introduction. The introduction succinctly states the problem you are interested in, briefly describes your data and the method of analysis and summarizes your main conclusions. A summary of what you set out to learn, and what you ended up finding. It should summarize the entire report.Data Description. This section provides the details of the data sources, any transformations you have done to the data (for example, changing the units of some variables), gives a table of summary statistics (means and standard deviations) of the variables, and provides scatterplots and/or other relevant plots of the data. If there are outliers other than those arising from corrected typographical or computer errors, this is the place to point them out.Regression Analysis. Describe how you used multiple regression to analyze the data set. Specifically, you should discuss how you carried out the steps in analysis discussed in class, i.e., exploration of data to find an initial reasonable model, checking the model and changes to the model based on your checking of the model.Empirical Results. This section provides the main empirical results in the paper. Conventionally, regression results are presented in tabular form, with footnotes clearly explaining the entries. The initial table of results should present the main results; sensitivity analysis using alternative specifications can be presented in additional columns in that table or in subsequent tables. For organizational purposes and clarity, you may choose to have some tables at the end of the paper, with appropriate references in the body of the paper as needed. The text should provide a careful discussion of the results, including assessments both of statistical significance and of economic significance, that is, the magnitude of the estimated relations in a real-world sense.Summary and Discussion. This section summarizes your main empirical findings and discusses their implications for the original question of interest. Describe any limitations of your study and how they might be overcome in future research and provide brief conclusions about the results of your study.Topic Selection (video)The model and the data are the starting points of an econometric project. The first step in formulating a model is to select a topic of interest and to consider the model’s scope and purpose. In particular thought should be given to the objectives of the study, what boundaries to place on the topic, what hypotheses might be tested, what variables might be predicted, and what policies might be evaluated. Close attention must be paid, however, to the availability of adequate data. In particular the model must involve causal relations among measurable variables.The topic selected can be economic or noneconomic. It could be a particular market (the market for UIUC graduates, the market for economists, the market for cellular phones), a process (economic development, inflation, unemployment), demographic phenomena (birth rates, death rates), environmental phenomena (water quality, air quality), political phenomena (elections, voting behavior of legislatures), some combination of these, or some other topic.You are free to choose the topic of your choice. The topic you choose will require approval from your instructor. Some paper title examples are presented below:Air pollution and PopulationDifferential Growth in U.S. CitiesBirth Rates, Death Rates, and Economic Growth in Developing EconomiesEconomic and Social Determinants of Infant Mortality in the United StatesThe Relationship between Exports and Growth in Less Developed CountriesRemember that these ideas above are merely examples of reasonable topics. You should be original and follow your own interests. Perhaps the best choice of a topic is one in which you have prior experience or knowledge.Keep in mind that this project is studying the impact of some independent variable X on a dependent variable Y. But since there are many variables X that have influence on the variable Y, it is important to include all those variables on the right hand side of the equation.To ensure that the model is both interesting and manageable, it should contain at least three to four independent variables on the right hand side. The model should be formulated as an algebraic, linear, stochastic equation along with a corresponding verbal statement of the meaning of the equation. The expected signs of all the coefficients should be considered. All relevant multipliers, short-run and long-run, should be identified and considered.Hypothesis and Research Question (video)Particular thought should be given to the objectives of the study, what boundaries to place on the topic, what hypotheses might be tested, what variables might be predicted, and what policies might be evaluated.Once you have a general understanding of your topic, narrow it down into a manageable research question or hypothesis. This will help you define the parameters of your research, as well as your argument. A research hypothesis is a statement of expectation or prediction that will be tested by research.Hypotheses look very much like “mini-arguments”; the objective of the research paper is to present evidence that will prove those hypotheses.Before formulating your research hypothesis, read about the topic of interest to you. From your reading, which may include articles, books and/or cases, you should gain sufficient information about your topic that will enable you to narrow or limit it and express it as a research question. The research question flows from the topic that you are considering. The research question, when stated as one sentence, is your Research Hypothesis.In your hypothesis, you are predicting the relationship between variables. Through the disciplinary insights gained in the research process throughout the year, you “prove” your hypothesis. This is a process of discovery to create greater understandings or conclusions.Identify Variables for the Study (video)Keep in mind that this project is studying the impact of some independent variable X on a dependent variable Y. But since there are many variables X that have influence on the variable Y, it is important to include all those variables on the right hand side of the equation.To ensure that the model is both interesting and manageable, it should contain at least three to four independent variables on the right hand side. The model should be formulated as an algebraic, linear, stochastic equation along with a corresponding verbal statement of the meaning of the equation. The expected signs of all the coefficients should be considered. All relevant multipliers, short-run and long-run, should be identified and considered.Data Sets (video)Before finding a data set, you must be aware of what data will help you to answer the question you are investigating. It helps to understand how you intend to perform your analysis. What unit of observation would be most useful ( local governmental data? international data? etc.)?In order for you to choose the right data set, you must be clear about what variables you are using before you search for your data set. You should already know what you are using for your dependent variable and what variables will help you answer the research question most effectively.The UIUC library would be a good place to start in your search for data. In addition to the material resources available there, you can also seek assistance from the data librarian, who will point you in the right direction.Here are some ideas for data sources that are available for public use:Statistical Abstract of the USStatistical HandbooksStatistical YearbooksFederal Reserve Economic DataInternational Economic ConditionsNational Statistical AbstractCenter for Research in Securities Prices