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Introductory Econometrics: A Modern Approach, JEFFREY M. WOOLDRIDGE, South-Western College Publishing, 2000, ISBN: 1-538-85013-2, pp. 824, Price (hb) $98.75
Intended as an introductory econometrics text for undergraduate economics students, this volume belies the research interests of the author, placing greater emphasis upon techniques needed when the individual consumer/producer is the observational unit and thereby going some way in redressing the balance away from the more usual time series methods using aggregate data.
Before providing an overview of the book, we draw attention to a number of distinctive features. First, each chapter is complemented by a large number of examples drawn from a wide range of topics in applied economics. In Chapter 1, students are introduced to the characteristics of observational data, with the central theme being the prerequisites for moving from a statement that x affects y, to x causes y. Central to this exposition are examples ranging from an economic model of crime, the effect of a minimum wage on unemployment, to the oft quoted and historically important example of measuring the effect of fertiliser use on crop yield. In each case differences across examples are drawn out, and at the same time the common theme of unobserved effects is introduced.
Notable here is the distinction that is made between the pseudo-experimental example of a scientist exerting control over the differential allocation of fertiliser across plots of land, and the non-experimental setting which characterises educational choice and the effect on wages. In emphasising these differences the author is able to clearly demonstrate the considerable complexities of economic data, and in particular problems involved in seeking exogenous variation. It is likely that students will find this introduction to the type of problems encountered when making inference using observational data enlightening, and quickly realise the fallacy of maximising R2, a predilection which is frequently inherited from a first year statistics course.
Throughout the text there are many more illuminating examples ranging from the determinants of fertility, participation in the Vietnam War, the impact of campaign expenditure on votes received in a local election, and measuring the returns to education. To keep students both amused and motivated, the examples centred around instrumental variables estimation are based upon the problem of attributing causality to the effect of skipping...