What is Econometrics?

Specializing in developmental economics, Dr. Philip H. Brown is an economist based in Washington, D.C. who uses economic theory to address issues such as poverty, education, and the environment. As an economist focused on real-world problems, Philip H. Brown employs a variety of economic tools and methods in his research, including econometrics.

Econometrics is a qualitative research approach that involves the application of mathematics, statistics, and sometimes computer science to data in order to draw conclusions about economic relations and systems. Econometrics is especially helpful in testing and demonstrating theories and is often used to explore the causes and effects of economic relationships. This fact makes econometrics a useful tool for not only mathematicians and economists, but also news organizations, banks, and governments, who utilize econometrics to explain current economic conditions and explore the potential effects of various economic policies. Coming to prominence as an academic discipline in the 1930s, econometrics is now taught at universities and colleges around the world.


Philip H. Brown Provides a Primer on Econometrics

While most people have at least a basic understanding of economics, fewer are aware of econometrics. In general terms, econometrics combines mathematics, in particular the use of statistics, with economics to analyze real-world and hypothetical situations.

Because of its use of statistical data, econometrics can be a powerful tool to study historic events and predict how various factors will affect future events. For example, using statistical data to measure the ratio of media coverage of past natural disasters to public aid provided may help relief agencies prepare contingency plans for future disasters that may receive more or less media coverage.

However, both the statistical model and the data must be reliable for a study and its resulting predictions to be effective. Additionally, the studies must take into account factors that may not appear on the surface in the raw data, such as cultural or gender differences that may otherwise influence the results.

Philip H. Brown is a development economist who has worked in China, Africa, Central America, and Chile. His research, which makes extensive use of econometrics, has been published in academic journals including Public Budgeting and Finance, the Review of Development Economics, and The Journal of Contemporary China.

Economics the World Can’t Afford to Overlook

Philip H. Brown, Ph.D. has lived and worked in China, Central America, Africa, and Chile. He has seen firsthand the impact of economics on real people, and it was his work in a Rwandan refugee camp that inspired him to pursue his doctorate to help the poor as a development economist.

One misconception people sometimes have about economics is that it is a field exclusively focused on the study of wealth. In contrast to this stereotype stands development economics, a branch devoted to the study of developing countries. There is no universally accepted definition of a “developing” country. The United Nations, the International Monetary Fund (IMF), and the World Bank all use different classification systems, taking into account factors such as per capita income level, export diversification, integration into the global financial system, international trade statistics, life expectancy, and literacy rates. Nonetheless, according to the IMF’s World Economic Outlook Report and World Bank data, more than 150 nations qualify as “developing.”

Economic inequality and poverty in developing countries represent a global problem. For economists such as Dr. Philip H. Brown, Paul Collier (former director of research for the World Bank), and Nobel laureates Amartya Sen and Joseph Stiglitz, the field of development economics marks a path toward resolving a problem that the world cannot afford to ignore.

The Fight Against Poverty in Chile, By Phillip H. Brown

Although Chile has seen significant reductions in poverty in the past 20 years, the country continues to suffer from high economic inequality. As of 2006, approximately 14 percent of the population in Chile lives in poverty. While this is dramatically lower than the nearly 40 percent of the population that lived in poverty in 1987, it remains a point of concern.

In a recent article I co-authored with Claudio A. Agostini of the Universidad Adolfo Ibañez entitled “Cash Transfers and Poverty Reduction in Chile,” we examined the various anti-poverty programs that have been launched to address the problem. We used data-mapping methodologies to compare the effectiveness of these initiatives at the sub-regional level.

Our research has showed that direct cash transfers have helped to greatly reduce the number of impoverished individuals by between 5 percent and 68 percent. These cash transfers have been particularly effective in rural areas where topography has also been found to have a role in their success. These findings can help guide Chile toward more focused and successful policies to combat poverty.

About Philip H. Brown
Development economist Philip H. Brown studies poverty and solutions to poverty, as well as health, education, the environment, and gender. He also studies the economics of natural disasters, such as the 2004 Indian Ocean tsunami. Brown holds a Ph.D. in Economics from the University of Michigan in Ann Arbor. Philip Brown’s work has been featured in Time magazine, The New York Times, and the book “Superfreakonomics”.

Exploring Media-defined Limits to Altruism by Philip H. Brown

I admire the unconventional and engaging approach to everyday economics undertaken by Steven D. Levitt and Stephen J. Dubner in their Freakonomics books and long-running associated blog. One of the Freakonomics articles I found most personally engaging was How Pure Is Your Altruism?, which was written in May 2008 following two major natural disasters – a devastating earthquake in China and a large cyclone in Myanmar. The article commented on the uneven distribution of individual American charitable giving following major natural disasters. For example, Hurricane Katrina, which resulted in 1,877deaths, brought in a total of $5.3 billion in individual donations from in the U.S. In contrast, the Asian tsunami of 2004 resulted in an estimated 220,000 deaths and brought in less than $2 billion in donations from Americans. Similarly, the 2005 Pakistan earthquake, which resulted in nearly 75,000 deaths, attracted only $150 million in individual U.S. contributions.

Certainly, the fact that Hurricane Katrina was an American disaster, hence closer to home, accounts for much of this difference. However, Levitt and Dubner identify two other factors in explaining low levels of donations, particularly following the Pakistan earthquake: donor fatigue after other high profile natural events and lack of media coverage. In exploring the latter phenomena, the authors excerpted a paragraph from my co-paper “Media Coverage and Charitable Giving After the 2004 Tsunami.” In sum, my paper shows that levels of media coverage following natural disasters have a significant impact on charitable donations made by Americans. Specifically, my co-author and I calculate that each additional minute of nightly television news coverage of a natural disaster results in a 13 percent increase in average donations on that same day. Similarly, each additional 700-word story in the Wall Street Journal or New York Times raises daily average donations by nearly 20 percent.
A sensible question, then, is “what causes certain natural disasters to receive extended coverage, while others are quickly forgotten?” One explanation is that level of media coverage is highly dependent on the occurrence’s distance from major media outlets and resources. Remoteness entails extra expenses in covering the natural disaster. Another significant factor is news cycle timing: both the China and Myanmar disasters occurred at a time when the U.S. Democratic primary between Barack Obama and Hillary Clinton was heating up, diminishing their media impact.

It seems to me that there are a multitude of opportunities for further research into the links between charitable contributions following natural disasters and the media. For example, given our shift to digital news, and a corresponding diffusion of news sources, it is unclear whether the results of our 2004 study apply to the same degree. I would argue that they do: even on the Internet, most readers never make it past the first page of the online edition of the New York Times, and YouTube video searches often follow reading about a disaster from a primary news source.

About the author: Development economist Philip H. Brown has authored numerous articles on issues such as poverty, vulnerability, natural disasters, and health and environmental economics. The referenced Freakonomics article can be accessed at http://www.freakonomics.com/2008/05/13/how-pure-is-your-altruism/. Phil Brown’s other papers may be accessed at http://www.philbrown.me.