Session 6: Before the session

Does the relationship hold across countries, and across years?

Thierry Warin, PhD

HEC Montréal

Outline · Before class

  1. What to do, and how long it takes
  2. Read the paper
  3. Get BOTH datasets
  4. The course data
  5. Self-check, and what the session will ask of you
  6. Before you run anything

What session 6 is for

The mathematics

  • Summarise sessions 2 to 5 as goal, implementation, results and interpretation
  • State what a panel is, and distinguish fixed from random effects
  • Use the Hausman test to choose between fixed and random effects
  • Read an interaction as a slope that differs between groups
  • Read a squared term as an effect that accelerates or levels off

The Python

  • Fit fixed- and random-effects models with PanelOLS and RandomEffects
  • Write an interaction (a * b) and a quadratic (I(x**2)) in a formula
  • Interpret both in units, from the fitted coefficients

The international business

  • Separate within-country change from between-country difference
  • Say which specification your identifying variation can actually support
  • Report the estimate and the specification, because neither means much alone

Before the session

Does the relationship hold across countries, and across years?

What to do, and how long it takes

1 Read the paper 45–60 min
2 Get both datasets — the paper’s, and your own angle 10 min
3 Attempt the self-check 15 min

The lecture assumes all three are done. The practice assumes the data is already cached on your machine.

1 · Read the paper

Topalova & Khandelwal (2011), Trade Liberalization and Firm Productivity

Read the article

Read for the argument, not for coverage. Annotate four things:

1 The research question, in one sentence
2 The method or design, and why they chose it
3 The strongest single piece of evidence
4 One limitation you would raise as a referee

2 · Get BOTH datasets

The practice uses two: the paper’s data, to reproduce one of its results, and your own angle, to apply the method. Have both before you arrive.

a) The paper’s replication package — Harvard Dataverse

10.7910/DVN/8WEXYD

Download it from the terminal — no Dataverse account, no browser. From the repository root:

macOS and Linux

mkdir -p 06-advanced-regression/data/replication && cd 06-advanced-regression/data/replication
curl -L -o replication.zip \
  "https://dataverse.harvard.edu/api/access/dataset/:persistentId/?persistentId=doi:10.7910/DVN/8WEXYD"
unzip -q replication.zip && rm replication.zip && cd -

Windows PowerShell

mkdir 06-advanced-regression/data/replication; cd 06-advanced-regression/data/replication
curl.exe -L -o replication.zip `
  "https://dataverse.harvard.edu/api/access/dataset/:persistentId/?persistentId=doi:10.7910/DVN/8WEXYD"
Expand-Archive replication.zip .; Remove-Item replication.zip; cd -

data/replication/ is git-ignored, so nothing large is committed. Keep the authors’ own structure — do not tidy it.

2b · The course data

import qmib

data = qmib.load("panel")     # what the lecture uses
core = qmib.load("core")                # the spine, shared by every group
mine = qmib.load("angle_c_country")     # REPLACE with your own angle

print(data.shape, core.shape, mine.shape)

Run this before you arrive. It downloads once and caches as parquet, so the practice works whatever the room’s wifi is doing.

angle_c_country is an example, not your angle. Yours is named in RESEARCH-MANDATES.md.

A country panel of government debt and economic-freedom indices · everything available: qmib.catalog()

3 · Self-check, and what the session will ask of you

Answer these on paper. If you cannot, that is what the lecture is for.

  1. In one sentence: what does this session’s method let you claim that the previous one did not?
  2. What must be true of your data for it to apply?
  3. Which claim in the paper rests on this method — and how hard does it lean on it?

By the end of the session you should be able to:

  • State what a panel is, and why pooling it with OLS understates uncertainty
  • Distinguish fixed from random effects, and say what each assumes
  • Fit a quadratic term and interpret a non-linear relationship in units
  • Read an interaction as a slope that differs between groups
  • Compare non-nested models on information criteria rather than an F-test

Arrive with: the paper read and annotated · the replication package unzipped · qmib.load() run at least once · your self-check answers on paper.

Before you run anything

Everything runs in the VS Codium terminal, from the repository root, with the project environment active. Activate it in every new terminal, not only the first:

source .venv/bin/activate        # macOS and Linux
.venv\Scripts\activate           # Windows (PowerShell)

Your prompt must begin with (.venv). Without it python and pip are your system’s, and nothing the course installed is visible to them.

ModuleNotFoundError means the packages went somewhere else, or were never installed. Check the prompt first, then pip install -r requirements.txt — from the repository root, with the environment active. Building the environment from scratch is Session 01, step 1.4.

Session 06: README.md · the lecture: 01-lecture/