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Big Data: New Tricks for Econometrics


  • Hal R. Varian


Computers are now involved in many economic transactions and can capture data associated with these transactions, which can then be manipulated and analyzed. Conventional statistical and econometric techniques such as regression often work well, but there are issues unique to big datasets that may require different tools. First, the sheer size of the data involved may require more powerful data manipulation tools. Second, we may have more potential predictors than appropriate for estimation, so we need to do some kind of variable selection. Third, large datasets may allow for more flexible relationships than simple linear models. Machine learning techniques such as decision trees, support vector machines, neural nets, deep learning, and so on may allow for more effective ways to model complex relationships. In this essay, I will describe a few of these tools for manipulating and analyzing big data. I believe that these methods have a lot to offer and should be more widely known and used by economists.

Suggested Citation

  • Hal R. Varian, 2014. "Big Data: New Tricks for Econometrics," Journal of Economic Perspectives, American Economic Association, vol. 28(2), pages 3-28, Spring.
  • Handle: RePEc:aea:jecper:v:28:y:2014:i:2:p:3-28
    Note: DOI: 10.1257/jep.28.2.3

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    References listed on IDEAS

    1. Hyunyoung Choi & Hal Varian, 2012. "Predicting the Present with Google Trends," The Economic Record, The Economic Society of Australia, vol. 88(s1), pages 2-9, June.
    2. Munnell, Alicia H. & Geoffrey M. B. Tootell & Lynn E. Browne & James McEneaney, 1996. "Mortgage Lending in Boston: Interpreting HMDA Data," American Economic Review, American Economic Association, vol. 86(1), pages 25-53, March.
    3. McLaren, Nick & Shanbhogue, Rachana, 2011. "Using internet search data as economic indicators," Bank of England Quarterly Bulletin, Bank of England, vol. 51(2), pages 134-140.
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    JEL classification:

    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis


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