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The Cult of Statistical Significance – What Economists Should and Should Not Do to Make their Data Talk

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  • Walter Krämer

Abstract

This article takes issue with a rather devastating critique of statistical significance testing propagated in a recent book by Ziliak/McCloskey (2008) of the same title. Ziliak/McCloskey argue that statistical significance testing is a barrier rather than a booster for empirical research in economics and should therefore be abandoned altogether. The present article argues that this is good advice in some research areas but not in others, with the aim of making practitioners aware of various fallacies connected with the concept of statistical significance, and at the same time showing where significance testing is most fruitfully employed. Taking all issues which have appeared so far of the German Economic Review and a recent epidemiological meta-analysis as examples, the present paper shows that there has indeed been a lot of misleading work where confirmatory significance testing has played a major role, and that at the same time many promising avenues, best summarized under the heading “specification tests”, have not been used.

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Bibliographic Info

Article provided by Duncker & Humblot, Berlin in its journal Schmollers Jahrbuch.

Volume (Year): 131 (2011)
Issue (Month): 3 ()
Pages: 455-468

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Handle: RePEc:aeq:aeqsjb:v131_y2011_i3_q3_p455-468

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  1. Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann D. & Stephan Klasen & Mario Larch, 2009. "Does German Development Aid Promote German Exports?," German Economic Review, Verein für Socialpolitik, vol. 10, pages 317-338, 08.
  2. Bachmann, Ronald & Burda, Michael C., 2008. "Sectoral Transformation, Turbulence, and Labor Market Dynamics in Germany," IZA Discussion Papers 3324, Institute for the Study of Labor (IZA).
  3. McCloskey, Donald N, 1985. "The Loss Function Has Been Mislaid: The Rhetoric of Significance Tests," American Economic Review, American Economic Association, vol. 75(2), pages 201-05, May.
  4. Bettina Becker & Silke Uebelmesser, 2010. "Health Insurance Competition in Germany - The Role of Advertising," Discussion Paper Series 2010_05, Department of Economics, Loughborough University, revised Mar 2010.
  5. Walter Kraemer & Gerhard Arminger, 2010. ""True Believers" or Numerical Terrorism at the Nuclear Power Plant," CESifo Working Paper Series 3180, CESifo Group Munich.
  6. Lovell, Michael C, 1983. "Data Mining," The Review of Economics and Statistics, MIT Press, vol. 65(1), pages 1-12, February.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. About the cult of statistical significance
    by Economic Logician in Economic Logic on 2012-03-07 14:40:00
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Cited by:
  1. Bücker, Michael & van Kampen, Maarten & Krämer, Walter, 2013. "Reject inference in consumer credit scoring with nonignorable missing data," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 1040-1045.
  2. Hübler, Olaf, 2013. "Methods in empirical economics - a selective review with applications," Hannover Economic Papers (HEP) dp-513, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.

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