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Prof. Wolf Wagner
Rotterdam School of Management,
Erasmus University,
and CEPR

Methodology courses in business and economics typically focus on either theory or on the empirical estimation. This course aims to bridge the gap between the two by exploring several ways in which empirical studies can benefit from using theory. 

We will demonstrate that using theory can often be a low-hurdle approach to improving empirical exercises. Without requiring the collection of new data, theory can help overcome identification challenges, sharpen empirical specifications, derive policy implications, or supplement regressions with additional quantitative exercises. Using theory can take, for instance, the form of explicitly linking the empirics to prior theoretical work, or adding a theoretical framework (even just a single equation) to the paper.

We will discuss these possibilities in the context of actual research papers. In doing so, we will also pay attention to their evolution. Several of these papers began as purely empirical studies but later added theory to overcome specific challenges and enrich the analysis.

This course helps participants improve the quality and impact of empirical research by better linking it to theory. By providing concrete examples and practical guidance.

Empirical researchers in all fields of business and economics who seek to improve the rigour of their work. Participants should be familiar with basic concepts of statistics/econometrics and hypothesis testing. The course is also of interest to applied theorists, making them better understand how their skills can contribute to the success of empirical studies.

Application deadline: 4 November 2024
Notification: between 12-14 November 2024

The course will cover the following topics:

1. Clarifying the mechanism and creating testable implications
Empirical exercises frequently investigate a fairly complex mechanism, and it is often difficult to understand how the various empirical results relate to the potential mechanism. This not only hinders the empirical investigation, but also a convincing presentation of the results. A simple framework may help illustrate the workings of the main mechanism. It creates a coherent framework to think about the mechanism and see whether it is consistent with the empirical results. As a side benefit, it naturally creates testable implications (e.g., "If it is our mechanism A, then it should disappear in subsample X") and helps to sharpen the empirical specification (e.g., "If it is mechanism A, then only this dimension of our empirical proxy should matter, but not the other").

2. Using theory to overcome identification challenges
Multiple economic mechanisms can be consistent with a set of empirical results, making identification challenging. Theory can help map channels into empirical outcomes and disentangle channels from each other. For example, theory can predict that a specific channel is only present (or more pronounced) under certain conditions (e.g., for a specific group of observations), which can then be empirically investigated. Alternatively, theory can help uniquely link a set of empirical outcomes to a specific mechanism.

3. Creating policy counterfactuals
The goal of academic studies is often to inform policy. In the case of an empirical paper, specific findings may be used to recommend certain policies. However, this approach is subject to the Lucas critique: agents are likely to adjust their behavior in response to a policy change. Theory, modeling both the direct impact of a policy and the optimizing behavior of agents, can account for both effects. Using estimated regression coefficients, this approach may allow calculating the net effect of policy changes, making it robust to the Lucas critique. Theory also helps a normative interpretation to regression findings. For example, in a certain situation, an estimated effect might be interpreted as an externality. The normative interpretation may then be used to make welfare inferences.

4. “Taking coefficients seriously”
Empirical studies often evaluate coefficient estimates in a narrow sense, for example, by assessing “economic significances” based on standard deviation changes. This can be a missed opportunity. In the context of theory, coefficients have specific meaning and can be used as inputs into (simple) additional exercises. For example, a coefficient may be interpreted as the “incidence” of an effect or as a “multiplier”. Utilizing this, one can carry out additional exercises, such as calculating industry-wide (or dynamic) effects, or do simple simulations based on the estimated coefficients.

The course will also feature assignments (a take-home group assignment as well as in-class breakout rooms) that will make course participants link their own work to theory, and apply the ideas of the course.

APPLICATIONS
Interested doctoral students should apply online (and add the required documents, in English) no later than 4 November 2024. Besides doctoral students, other researchers may participate. The number of participants will be limited to create a stimulating environment. The selection among the applicants will be conducted by the seminar’s faculty. They will review the following documents which should necessarily complement each application form:

• the applicant’s curriculum vitae demonstrating his/her capabilities of doing research ;
• a letter of recommendation of his/her local faculty supporting the application ;
• a two-page description of his/her doctoral research, indicating the general objectives.

PROCESS

1 – Apply for the seminar by submitting all necessary documents online by the announced deadline. All documents need to be in English. 
2 – EIASM will notify you of the selection results. If you are accepted to participate, the Institute will inform you at this point if you are eligible for a scholarship and will confirm the amount of the scholarship. 
3 – EIASM will ask you to confirm your participation and once this confirmation is received, you will be invoiced for your attendance. 

Full attendance and a term paper are required to obtain the certificate.
2.5 ECTS will be assigned upon completion of the seminar.

PARTICIPATION FEE
The participation fee is 680 € (VAT exempt).
This fee includes participation to the seminar and access to documents. 

EIASM SCHOLARSHIPS
EIASM provides 3 scholarships per EIASM Academic Council Member for this seminar (50% off the registration fee). Allocation of the scholarships is entirely at the discretion of the European Institute.

Important: please double check the validity of your university’s membership. It may run until a specific month of a given year and thus only make you eligible for a discount until the end of that month. For the complete list of members click here. 

CANCELLATION POLICY
Requests for registration cancellations must be received in writing by the EDEN Team (eden@eiasm.be) before 1 December 2024. Cancellations received before this date are eligible for 90% refund. Cancellations received on or after 1 December 2024 are not eligible for a refund. 

TIME AND LOCATION
The seminar will be held ONLINE. Full participation is required. 

Schedule:
 - December 9th - 9 am to 4 pm
 - December 10th - 9 am to 4 pm
 - December 11th - 9 am to 12 pm (midday)

Apply via the Registration link below 

REGISTER ONLINE