Archive for economics

Quantitative Coursework at SIPA: Yes, you will pass

I remember when I first looked at the core requirements for SIPA:
Microeconomics
Macroeconomics
Quantitative Analysis

I saw those three classes and I immediately thought “Am I cut out for this?”

For context, I attended a small liberal arts college where I majored in Government and History. During my four years of undergrad, I took one math course and one science course. My internships didn’t require much of a quantitative background, so I graduated with only a basic understanding of Excel and organizational databases. Yet, I still decided to apply. When I was admitted, my anxiety did not get better. Instead, it got worse. I kept worrying that I was going to have some sort of reverse “Eureka!” moment while sitting in Microeconomics, where I finally realized I was incapable of doing graduate level math.

Alas, that did not happen; I managed to get through Micro and Macro my first year and even received high grades in both classes!

For anyone who is worried about the Quant requirements, please do not stress. It is possible to succeed in these courses! And no, SIPA students are not all math whizzes or kids who act like they don’t get math but are secretly really good at it. I’d say a majority of newly admitted SIPA students come in with a similar background as myself.

So in terms of what you can expect, here’s a rough breakdown.

Micro/Macro:

Both entry level economics courses are mandatory for all SIPA MPA/MIA students. There are two ‘levels’ to the courses. The upper division classes are for students who are comfortable with calculus or are really willing to challenge themselves, by learning how to pick up the calculus concepts as they go. Students who either concentrate in International Finance and Economic Policy or want to take higher level economics/trade/finance courses all take the upper division micro/macro courses.

I took the lower level options for both Micro and Macro. Both classes have a fair share of math, but is is mostly arithmetic and geometry. Most of it is all conceptual and the class really is about understanding when to use the right formulas/approach to a question. Believe or not, the math becomes easier over time; the hard part, is again, knowing when to use what.

Whether you enroll in the lower or upper level courses, you will have your main two hour class, recitation, which is an extra class taught by teaching assistants, and a weekly group problem set.

Thankfully, students have access to teaching assistants who offer office hours pretty much every day of the week. These office hours last around two hours and they’re an excellent opportunity to go over concepts and to ask questions you may have on problem sets.

I was diligent about staying on top of my work, so I would go to class, recitation, and office hours every week. Add on top of that the time I spent on the homework and I probably ended up spending roughly ten or more hours a week on Micro/Macro.

However, when you are working with these ideas for hours every week, you really start to pick it up. If you put the time in, you will learn it; trust me!

Quantitative Analysis (Quant):

I am currently in Quant 1 now. Quant is essentially statistics. You have one weekly lecture, a ‘lab’ which is effectively a recitation, and a weekly problem set. The class mostly covers the formulas and theory behind Stats, while the labs tend to focus on interpreting and using STATA, a program for statistics that helps researchers organize and analyze data.

I have found Quant to be a bit harder than Micro/Macro. That being said, if you attend class, lab, office hours and work on the problem set, it’s almost impossible to walk away without feeling like you have some sort of grasp on the topic.

For the more ambitious students

In all likelihood, I won’t be taking anymore quantitative courses at SIPA after I knock out my requirements. However, I have known plenty of students that have gone on to complete the upper division courses, including some friends of mine who were equally as worried about Micro and Macro!

For students interested in learning more about Statistics, you can take Quant 2 and Quant 3, as well as other modeling and research methods courses.

For students interested in higher level economics courses, be mindful that some courses require that you take upper level Macro/Micro; this is typically because these classes use calculus and other advanced methods that are not covered in the lower level introductory courses.

However, there are plenty of upper level courses that do not have rerequisites that cover international trade, game theory, cost-benefit analysis, budgeting and financial markets.

The Point Is, Don’t Psych Yourself Out

If you are currently applying to SIPA or were recently admitted, you are capable of doing well in SIPA’s quantitative courses. These courses are a veritable rite of passage here and everyone experiences it together. By your second year, Micro/Macro will be a distant memory and you’ll joke with your peers about how stressed you all were. So to all future Seeples out there, good luck!

5 Brexit questions with Economist Jan Svejnar

From Columbia News, June 24, 2016:

The fallout from Brexit, the British exit from the European Union, was nearly immediate. Every global market sank. British Prime Minister David Cameron resigned. A large U.S. investment bank announced it would move 2,000 jobs out of London to either Dublin or Frankfurt, the credit agency Standard & Poor’s said that the Britain would lose its AAA rating while Moody’s lowered its rating to negative from stable.

More shoes are still to drop, according to Jan Svejnar, the James T. Shotwell Professor of Global Political Economy at the School of International and Public Affairs. While he knew the vote would be close, he believed that Britons would ultimately stay. He was surprised the leave vote was as strong as it was, 52 percent to 48 percent.

The repercussions will be significant. “I think we are seeing the unraveling of Great Britain,” he said. Scotland, which two years ago voted no on an independence referendum, will probably opt for a new one. Northern Ireland could do the same. “We may be going from Great Britain to small England.”

Here, Svejnar answers five questions about what will happen now that Britain is withdrawing from the EU.

Q. What happens next?

A. We are already seeing the first impacts, the gyrations in the stock markets and foreign exchange markets. I think that may continue for a while. Next will come a first round of tough political decisions. German chancellor Angela Merkel will be getting together with Italian Prime Minister Matteo Renzi and French president Francois Hollande to prepare a statement and stake out their approach to the British decision.

Q. What kind of approach might that be?

A. They have to negotiate a separation, which won’t be easy. If it is done too fast and too vigorously, it could alienate other EU nations, who may insist the rest of the 25 members should have been consulted rather than having a particular solution designed by the leaders of only those three countries shoved down their throats. There are free trade policies and immigration pacts and a swath of EU regulations that must be unraveled or replaced. The EU won’t want to make it easy for Britain to leave, they don’t want this to set a precedent for other countries.

Q. What kind of economic fallout do you foresee?

A. There are two years to negotiate the exit, unless markets destabilize to such an extent that they can’t afford to take that long. All the agreements between the EU and Britain must be renegotiated. There may be a substantial relocation of capital from Britain. London could lose its status as a global hub of finance, and I’ve already heard that some banks are looking to move their headquarters.

Q. How does this affect the rest of Europe, or the world?

A. Britain is now the second largest economy in the EU, and the most outward oriented. There is a chance that Europe itself gets destabilized, because now other governments may ask for exceptions and exemptions from EU regulations. If that happens, Europe may not look to be as friendly a place to invest in, and investors may look to other parts of the world. Also, other nations will be cautious about raising interest rates, to make sure there is no economic contagion.

Q. Is there any chance that this can be reversed?

A. In principle, yes. It takes a vote of Parliament for the decision to become final. Parliament could conceivably go against the referendum, but the vote was 51.9 percent to 48.1 percent. It would be hard for it to say this was just a joke. Given that David Cameron has already resigned, I don’t see that this can be stopped.

[Photo by Bruce Gilbert]

Mathematics? Language? A resume?

Even Albert Einstein said: “Do not worry about your difficulties in Mathematics. I can assure you mine are still greater.”

Our perceptions of our skills tend to skew left, and when we think about our math ability, we reflect on our confidence, and not our actual skills.

The SIPA Admissions office understands that applicants will have varied quantitative backgrounds and skills. We have designed an application that best allows you to demonstrate your quantitative competencies through the quantitative/language resume. Here, you can highlight experiences that have strengthened your math, economics, and statistics skills.

The core curriculum at SIPA requires the completion of rigorous quantitative courses and we want to make sure applicants provide as much information as possible about their quantitative aptitude, experience, and capabilities. This can include coursework in mathematics, statistics, economics, engineering, natural or computer science, etc. as well as the use of quantitative methods in a professional environment (paid, volunteer, or intern work is acceptable).

Perhaps you have worked as an accountant, bookkeeper, or balanced budgets in your professional experiences. Perhaps you served as treasurer of a student organization or used quantitative skills in a volunteer opportunity. These are experiences that you can include in the additional resume.

Is there an ideal quantitative background SIPA is looking for in an applicant?

Recently, we’ve received many questions about what makes an ideal quantitative background for a hopeful candidate.  While SIPA does not have a rigid answer, the Admissions Committee looks for evidence of a candidate’s ability to undertake quantitative coursework at the graduate level. Most successful applicants have completed at least two courses in economics (macro and microeconomics). Applicants lacking a quantitative background are encouraged to consider enrolling in mathematics courses above all else.

While the Admissions Committee does not require that each applicant have experience in all three areas (economics, statistics, and mathematics) to be admitted, extensive coursework in these areas definitely strengthens one’s chances of gaining favorable admission consideration.

For more on quantitative questions, check out our Frequently Asked Questions pages.

 

A SIPA Faculty Interview

Eric Verhoogen, an associate professor of international and public affairs and economics, followed a somewhat unorthodox path to SIPA. “After college at Harvard, I was a high-school teacher in Los Angeles, and then tried my hand at journalism in Berkeley and at the Nation. Then I was a labor organizer in Minnesota and Ohio. And then I started grad school at UMass Amherst and later transferred to Berkeley.” After earning his PhD in 2004, he came directly to SIPA, where he received tenure in 2010.

In a study of soccer ball manufacturers in Pakistan, Professors Eric Verhoogen of SIPA and Amit Khandelwal, Gary Winnick and Martin Granoff of Columbia Business School found that how workers are paid, and whether or not incentives are offered, can promote or stifle the adoption of a new technology. Below were some additional information Verhoogen shared about the study and some other things he’s working on.

You found clearly that misaligned incentives can compromise the adoption of otherwise beneficial technology. Why is this significant, and what are the challenges inherent in a study like this?

It’s an interesting, important question for economic development and growth more generally. It’s also a hard question to study because it’s hard to observe technology use by manufacturing firms and rare to have information about the actual cost and benefits of technology.

This is partly because technologies vary a lot across firms, and particularly across sectors. And unlike other types of data, it’s hard to collect via survey—sometimes firms don’t want to share information. Economists have other methods to estimate productivity, but they’re all pretty indirect.

Why soccer balls? I realize it’s just a coincidence that we’re in the middle of the World Cup tournament.

With soccer-ball producers [in Sialkot, Pakistan], you have a pretty large number of firms, 135, producing a standardized product using similar technology. So the same basic production process is used by large and small firms alike. We thought we could introduce a new technology that would be useful to these guys, to producers, and focus on the diffusion process.

As the Columbia News story explains, Verhoogen and his team developed a fabric-cutting die that would enable producers to use fabric more efficiently, creating an opportunity to cut costs and increase profits.

Is it unusual that your team of researchers gave the manufacturers a technological advancement? Does it impact the study somehow?

In development economics, there’s been a broad trend over 15 or 20 years, of having more of these experimental interventions. There’s a large literature on technology adoption in agriculture where researchers share information about improved production processes. What’s more unusual about our study is that we are focusing on larger manufacturing firms and especially that we invented the technology we gave out.

So what happened when you introduced the new technology?

We gave the dies out in May 2012, and to be honest we were expecting very fast adoption. We were planning to focus on the diffusion process, seeing how the technology spread to firms we didn’t give it to.

We had evidence to indicate that the technology was working, that it was more efficient, but after 15 months only six firms had adopted the new technology. This was a puzzlingly low adoption rate, so we decided to write a paper about that.

The number-one reason firms didn’t adopt the new technology was that the employees were unwilling to use it. What became clear was that the cutters actually cutting the material are paid a piece rate per pentagon or hexagon. They want to go as fast as possible and don’t care about waste.

Our new technology slowed them down initially, certainly for the first month or two, and given their wage contract they have no incentive to adopt new technology. So we formulated this hypothesis that the misalignment of incentives was a key constraint to adoption.

We did a second experiment to probe this—we explained the misalignment and said we would pay a lump-sum bonus of one month’s salary, about $150, to the cutter if in one month he could demonstrate competence in the new technology.

The incentive program led to a 26 percent increase in probability of adoption of the new treatment. That such a small incentive targeted at workers could have a significant effect indicated to us that the misalignment of incentives is why the technology wasn’t being adopted.

Can you elaborate on the significance of your findings, and the study?

One piece of the big picture is that you have to have employee buy-in. Workers will only cooperate in the adoption of new technologies if they expect to gain—and if they don’t cooperate, they can effectively block it.

Also, by introducing the innovation we were able to actually observe the process and statistically distinguish between different hypotheses, as opposed to in case studies. This was a particularly clean setting, and we have a strong argument that the new technology is beneficial for essentially all firms.

I think this sort of thing happens all the time in many different settings. We happened to be able to observe it in one setting, but we think there are many incremental changes that could be made in different settings, and make a big difference.

Traditional economists sometimes say there can’t be a $100 bill on the sidewalk because if there were, someone would pick it up. We think this is a $100 bill on the sidewalk, but firms aren’t picking it up.

You’re also the director of SIPA’s Center for Development Economics and Policy. How has CDEP been received since it formally launched in November 2013?

There’s a lot of enthusiasm about development economics at SIPA. There’s been a great response from students and faculty members, and also from people outside SIPA.

We have a couple of initiatives that are gaining momentum. One is a human capital initiative for human education and health issues—what leads someone to acquire education, what factors shape education and health, and what are the consequences of that for a labor market. Another is our firms and innovations initiative, which examines issues around industrial upgrading in developing countries— the question of why some countries can grow and thrive in world economy and some less so.

Another coincidence with the World Cup… you’re also pursuing research in Brazil.

In Brazil, with support from the President’s Global Innovation Fund, I have a project on the interaction between labor market regulation and innovation at the firm level.

The question is, how do firms respond to labor market regulation? Economists tend to think of the effect of labor regulation as uniformly negative, but we’re investigating whether there are less familiar but important positive effects on firm behavior.

For example, the minimum wage in Brazil has risen a lot. The minimum wage affects the relative cost of hiring different types of workers, more low-skill than high-skill. If you give firms incentive to upgrade the composition of their workforce that may in turn induce them to use higher quality inputs, to produce higher quality outputs for sale to richer people in Brazil or richer export markets.

You’ve lived and worked in many different and interesting places. After almost 10 years here, how does SIPA measure up?

I very much like being at SIPA and teaching SIPA students because it keeps me grounded in the world. Our students have experience in the world and they’re planning to go back and be involved in things on the ground—I think it’s healthy and stimulating for me to be exposed to them and to be at a place that respects policy-oriented work. I got into this job to make the world a better place and I haven’t given up hope that that’s possible.

quants are not that scary when we’ve got your back

If you majored in business or a natural science in undergrad then you are probably not that concerned about math. However, if you are like a large proportion of SIPA students who concentrated more on “political” than “science”, you will need to brush up on your math skills. But don’t worry, Columbia has resources.

Preparing  beforehand, is an excellent way to ensure you have the time to meet all your SIPA requirements. You may consider taking quantitative and/or economic courses to boost your quantitative resume. If additional classes are too expensive, there are a number of free and reputable online courses that you can choose from. I also recommend Schaum’s “Outline of Mathematical Methods for Business and Economics” (ISBN: 9780070176973).   It is a great workbook for practicing all the things you forgot you knew. After you are accepted to SIPA, you will have access to online math tutorials all summer long… but don’t wait.

Once you get to SIPA, you will still have some great resources. All students attend math camp during orientation. At the end of this high speed review from algebra to calculus, you will take a placement exam. If you test out of it, great. If not, there are three levels of courses given over the first four weeks of classes. Your score will determine into which 4 week Lab you are placed; those scoring very low will be required to attend additional sessions. In the math courses, you will continue to review the essential math topics and there is no test to complete the class. Attendance is mandatory and you should definitely take advantage of the free resource. You will actually use it in your year-long economics adventure and your quantitative analysis course.

Math tutors may be available through the Office of Student Affairs.  Also, throughout the year, the Teacher Assistants (TAs), are available to help you prep for your quant heavier courses. Calculate your opportunity cost and take advantage of SIPAs technically FREE resources.

If you still feel like you are just not made for math, read these articles by The Atlantic:

Math doesn’t have to be scary! The Atlantic: http://www.theatlantic.com/education/archive/2013/10/algebra-doesnt-have-to-be-scary/280931/

The myth of “I’m bad at math” The Atlantic: http://www.theatlantic.com/education/archive/2013/10/the-myth-of-im-bad-at-math/280914/

"The most global public policy school, where an international community of students and faculty address world challenges."

—Merit E. Janow, Dean, SIPA, Professor of Practice, International and Economic Law and International Affairs

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