The ECON213 Econometrics II Coursework Project

Deadline
The deadline for the group coursework is 9am on 16th April. The work must be submitted
by one member of each group through Assessment on Canvas.

Report
The coursework will be an independent project for each group, which you must carry out
and write up as a report coming to no more than 2500 words, excluding contents page,
footnotes, bibliography and appendices. The Appendix is to be no more than 10 pages in
length. The coursework accounts for 50% of the module mark. Your reports will be graded
and returned within four weeks. Please appreciate that it takes time to read, understand,
and provide feedback, and the grades will also be moderated.

The proposed area for projects: explaining what affects income distribution.
Countries vary considerably in their income distribution. Measures of inequality such as the
Gini coefficient can also vary over time for a particular country. There have been a number
of empirical papers that attempt to find the factors affecting income distribution or income
inequality; that is to say, the variables that do well in explaining how measures such as the
Gini coefficient vary across countries or across time (or both).

Previous literature has offered a number of explanations that stress the differences
between high-inequality and low-inequality countries in cultural heritage (Alesina and
Fuchs-Sch ̈undeln, 2005), in the perceptions of a social mobility (Piketty, 1995, Alesina and
Glaeser, 2003), in the preferences for fairness (Alesina and Angeletos, 2005a, 2005b,
Benabou and Tirole, 2005), in the political power of the rich as a result of unequal campaign
contributions (Campante, 2006), in the coercive power of the state (discussed in Boadway
and Keen,2000).

For more reference, see the list of papers available on Canvas.

Key requirements
You should use one or more Equality-related variables as your dependent variable in your
analysis. The analysis can be cross sectional, where, for example, you could consider the
factors that help to explain variations in countries’ Gini coefficients (an inequality measure).
Alternatively, you can investigate the factors effecting inequality or other aspects of the
income distribution across regions (or smaller geographical units) within an individual
country.

• You will need to do a literature review and obtain data for possible explanatory
variables. It is recommended that you start by looking at the reference on Canvas,
which discusses some of the literature and potentially important variables. You may
want to identify additional factors that may explain differences or changes in
inequality, or which address other questions relating to income distribution, via a
wider search of the empirical literature on inequality.
• Moreover, you will need to search the more recent literature, for example using
http://scholar.google.com or the search facility at
http://libguides.liverpool.ac.uk/onlineprogrammes/ejournals.
• You should comment in more depth on two or more articles and how they relate to
the analysis in your project.
• Your report should go beyond the readings that are provided to you on Canvas.
• In addition to the two articles that you discuss in some detail (a paragraph or two
about each), you should mention other related articles as well. Explanatory
variables should all be motivated by relevant literature.
• You will need to choose appropriate tools, including diagnostic tests. For example, Is
the function form in your model misspecified? Is there evidence for
heteroskedasticity? Are any of your explanatory variables “endogenous”? If so, what
should you do?
• Diagnostic tests must be carried out before looking at the significance of individual
coefficients.
• STATA outputs should only appear in the Appendix. It is likely that there will not be
space in the 10-side Appendix for you to list every STATA output. Instead, you should
aim to include outputs for your more important results, or where you have
implemented different methodology. The main body of the report should contain
summary tables. As an example of a summary table, see Table A2 of "Inequality and
Media Capture" (Petrova, 2008)
• Equations should be typeset using Equation Editor (in Word) or similar, and not
included as picture files.

Report Format
• In English
• Use font Arial
• Use font size 12
• Use double line space
• The pages should be numbered
• Footnotes should appear at the bottom of the page
• Not less than 2,000 words in length and shall not exceed 2,500 words
• Give full reference to the sources used
• In Microsoft Word (.docx)
• Citations and references should be in Harvard Format.

Please ensure that you have followed the above instructions, as you are not permitted
to make further changes once you have handed in your report.

Data Resources
• World Bank data - http://databank.worldbank.org/data/home.aspx.
• A list of data bases is here - http://databank.worldbank.org/data/databases.aspx.
• Here are three that may be useful:
o Poverty and Equity Database -
https://databank.worldbank.org/source/poverty-and-equity
In particular, the Gini index series in the Poverty and Equity database has
data for the Gini coefficient.
o World Development Indicators (WDI) -
http://databank.worldbank.org/data/reports.aspx?source=world-
development-indicators
o Indicators of governance quality -
http://info.worldbank.org/governance/wgi/index.aspx#home
• Many other sources of data are available online. See Week 5 Lecture about How to
carry out an empirical project.

Academic integrity
You are reminded that the group report should be your own group unaided work. You
should not work in cooperation with any other groups, and you should not show your
completed report to others.

You should acknowledge fully in your references any published work which you have used,
and indicate clearly the source of any direct quotations. Instructions and examples on how
to write references and avoid plagiarism can be found on pages 14-23 of your UG Study Skill
Handbook.