From Joshua Angrist, winner of the Nobel Prize in Economics, and Jörn-Steffen Pischke, an accessible and fun guide to the essential tools of econometric researchApplied econometrics, known to aficionados as 'metrics, is the original data science. 'Metrics encompasses the statistical methods economists use to untangle cause and effect in human affairs. Through accessible discussion and with a dose of kung fu-themed humor, Mastering 'Metrics presents the essential tools of econometric research and demonstrates why econometrics is exciting and useful.The five most valuable econometric methods, or what the authors call the Furious Five-random assignment, regression, instrumental variables, regression discontinuity designs, and differences in differences-are illustrated through well-crafted real-world examples (vetted for awesomeness by Kung Fu Panda's Jade Palace). Does health insurance make you healthier? Randomized experiments provide answers. Are expensive private colleges and selective public high schools better than more pedestrian institutions? Regression analysis and a regression discontinuity design reveal the surprising truth. When private banks teeter, and depositors take their money and run, should central banks step in to save them? Differences-in-differences analysis of a Depression-era banking crisis offers a response. Could arresting O. J. Simpson have saved his ex-wife's life? Instrumental variables methods instruct law enforcement authorities in how best to respond to domestic abuse.Wielding econometric tools with skill and confidence, Mastering 'Metrics uses data and statistics to illuminate the path from cause to effect.

List of Figures viiList of Tables ixIntroduction xi1 Randomized Trials 11.1 In Sickness and in Health (Insurance) 11.2 The Oregon Trail 24Masters of 'Metrics: From Daniel to R. A. Fisher 30Appendix: Mastering Inference 332 Regression 472.1 A Tale of Two Colleges 472.2 Make Me a Match, Run Me a Regression 552.3 Ceteris Paribus? 68Masters of 'Metrics: Galton and Yule 79Appendix: Regression Theory 823 Instrumental Variables 983.1 The Charter Conundrum 993.2 Abuse Busters 1153.3 The Population Bomb 123Masters of 'Metrics: The Remarkable Wrights 139Appendix: IV Theory 1424 Regression Discontinuity Designs 1474.1 Birthdays and Funerals 1484.2 The Elite Illusion 164Masters of 'Metrics: Donald Campbell 1755 Differences-in-Differences 1785.1 A Mississippi Experiment 1785.2 Drink, Drank, . . . 191Masters of 'Metrics: John Snow 204Appendix: Standard Errors for Regression DD 2056 The Wages of Schooling 2096.1 Schooling, Experience, and Earnings 2096.2 Twins Double the Fun 2176.3 Econometricians Are Known by Their . . . Instruments 2236.4 Rustling Sheepskin in the Lone Star State 235Appendix: Bias from Measurement Error 240Abbreviations and Acronyms 245Empirical Notes 249Acknowledgments 269Index 271