Data Economics is an empirically oriented research discipline Its models and analyses are intended to be applicable to real world situations and especially real world data Empirical research in economics is made easier by the fact that so many of the variables of interest prices of goods quantities transacted amounts earned sums lent etc are not only quantifiable but also potentially observable Still the relative ease with which these variables can be measured sometimes leads economists to take for granted the methods by which the variables are actually measured As data are the fundamental building blocks in our empirical analyses it is important that we carefully consider their sources properties and uses The word data is used ubiquitously inside and outside of economics Despite our exposure to the word it still helps to review what the word means Data is the plural of the word datum which means a piece of information such as a fact measurement or observation Thus the word data describes multiple pieces or a collection of information 1 They can be analyzed by themselves such as when we examine trends in national output or personal incomes or joined together to form more complex pieces of information such as when we combine an income series with a price index to construct real or inflation adjusted income measures We reserve the term economic data to refer to pieces of information that describe different aspects of economic processes including economic outcomes and constraints The data that economists use in their empirical research do not just magically spring fully formed out of the nowhere although students might excused for suspecting this given the small amount of attention given to the subject in most economics textbooks All data have some source and are created by some process To use and interpret data properly we need to know how the information was generated and collected This chapter discusses these processes as well as general properties of data It begins by describing the ideal use of data and then moves on to practical concerns of what data actually represent how they are recorded how they are organized and how they are manipulated before entering an analysis A motivation behind writing this chapter is that students are often surprised and occasionally frustrated at the time and effort that it takes to identify and prepare data for an analysis Their project planning gives a lot of thought to the theoretical models and statistical models that they might use but relatively little thought to how they will get the proper data for those analyses New researchers invariably discover that data are seldom in a form that can be immediately analyzed in any serious way and that data preparation consumes the lion s share of the time of an empirical investigation The data tasks of a project are made easier by some advance knowledge by planning and thought and by practice Moving between theory and data In the previous chapter we discussed how theoretical models are central to social science 1 This is a good place to interrupt with the grammatical point that the word data is plural and hence should always be matched with plural forms of modifiers and verbs For example we write these data rather than this data and the data are rather than the data is Ribar A Practical Guide to Conducting Economic Research Data research Recall that theoretical models help us to understand how and why people either alone or in groups such as households firms communities or countries behave the way they do They also help us to understand how people might behave under different or yet to be observed circumstances Recall also that theoretical models are written in terms of a set of variables and that they describe relationships between these variables To the extent that these variables and relationships have counterparts that can be observed among actual people the theoretical models can be taken to the data to be tested calibrated or used to make predictions It is helpful to bear in mind the distinction between theories which describe things as they might exist or are hypothesized to exist and empirical observations which describe things as they do exist To emphasize this distinction we use one set of terms for the theoretical elements in our analyses and another set for the empirical elements Specifically we refer to the elements from our theories as theoretical constructs these include the theoretical variables and theoretical relationships from our conceptual models In principle each of these theoretical constructs has an empirical counterpart or empirical construct that we might be able to observe and record The empirical counterparts to theoretical variables and relationships are called measures and empirical relationships respectively We would describe the whole group of empirical constructs that are associated with a particular theoretical model as the empirical model or the empirical representation of a model Developing an empirical representation of a theoretical model theoretical variable Y empirical measure B empirical relationship Empirical model theoretical relationship Theoretical model theoretical variable X empirical measure A 2 Ribar A Practical Guide to Conducting Economic Research Data The diagram on the preceding page illustrates the process of developing empirical counterparts to a simple theoretical model with two theoretical variables X and Y and a single theoretical relationship The theoretical model with its three constructs is shown in the box on the left side of the diagram In the box the two variables appear as ovals while the relationship appears as a thick vertical arrow An empirical representation of this theoretical model is shown on the right side of the diagram Notice that each of the theoretical constructs has an empirical counterpart There is a measure A that corresponds to the theoretical variable X a measure B that corresponds to the theoretical variable Y and an empirical relationship that corresponds to the theoretical relationship In the diagram the correspondence between each of the theoretical and empirical constructs is indicated by the horizontal arrows An empirical analysis uses all of the elements the measures and the relationships from the right side of the diagram In this chapter however we will focus on the measures In subsequent chapters we will discuss ways of investigating the relationships between the measures Demand example As a concrete example of