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The Strengths and Weaknesses of Factor Analysis in Predicting Cuban GDP

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Author Info

  • Nicolas Sanchez

    ()
    (Department of Economics, College of the Holy Cross)

  • Miles Cahill

    ()
    (Department of Economics, College of the Holy Cross)

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    Abstract

    This paper has a dual purpose. At the technical level, it updates the work of Gitanjali Joglekar and Andrew Zimbalist (1989) on the use of factor analysis to estimate per capita Gross Domestic Product (GDP) for Cuba. At the analytical level, it questions the validity of this approach when the underlying economic structure of factor analysis is based on the data of relatively unregulated economies such as those of other Latin American countries. The main conclusion of the paper is that while factor analysis is indeed a powerful predictor of the economic performance of market economies, it tends to overestimate the level of economic activity of command economies, and it fails to take into account subjective (i.e., utility-related) values which are assumed to be an intrinsic part of any measure of economic well being. If this criticism stands, then it follows that other similar studies of Cuban GDP are failing to provide a good measure of economic performance and well being in this island nation.

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    File URL: http://lanic.utexas.edu/la/cb/cuba/asce/cuba8/32sanchez.pdf
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    Bibliographic Info

    Paper provided by College of the Holy Cross, Department of Economics in its series Working Papers with number 9806.

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    Length: 16 pages
    Date of creation: Aug 1998
    Date of revision:
    Publication status: Published in Cuba in Transition, 1998, Vol. 8, pp. 273-288.
    Handle: RePEc:hcx:wpaper:9806

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    Web page: http://www.holycross.edu/departments/economics/website/
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    Keywords: Cuba; Cuban GDP; factor analysis;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Betancourt, Roger R, 1996. "Growth Capabilities and Development: Implications for Transition Processes in Cuba," Economic Development and Cultural Change, University of Chicago Press, vol. 44(2), pages 315-31, January.
    2. Pissarides, Christopher A, 1997. "Learning by Trading and the Returns to Human Capital in Developing Countries," World Bank Economic Review, World Bank Group, vol. 11(1), pages 17-32, January.
    3. Marshall, Jeffery H., 1998. "The political viability of free market experimentation in Cuba: Evidence from Los Mercados Agropecuarios," World Development, Elsevier, vol. 26(2), pages 277-288, February.
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    Cited by:
    1. Miles Cahill & Nicolás Sánchez, 2001. "Using principal components to produce an economic and social development index: An application to Latin America and the U.S," Atlantic Economic Journal, International Atlantic Economic Society, vol. 29(3), pages 311-329, September.

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