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In the quest for economic significance: assessing variable importance through mean value decomposition

Author

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  • H. E. T. Holgersson
  • T. Norman
  • S. Tavassoli

Abstract

Economic significance is frequently assessed through statistical hypothesis testing, which however, does not always correspond to the implicit economical questions being addressed. In this article we propose using mean value decomposition to assess economic significance. Unlike most previously suggested methods the proposed one is intuitive and simple to conduct. The technique is demonstrated and contrasted with hypothesis tests by an empirical example involving the income of Mexican children, which shows that the two inference approaches provide different and supplementary pieces of information.

Suggested Citation

  • H. E. T. Holgersson & T. Norman & S. Tavassoli, 2014. "In the quest for economic significance: assessing variable importance through mean value decomposition," Applied Economics Letters, Taylor & Francis Journals, vol. 21(8), pages 545-549, May.
    • Handle: RePEc:taf:apeclt:v:21:y:2014:i:8:p:545-549
    DOI: 10.1080/13504851.2013.872757
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    References listed on IDEAS

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    1. Ziliak, Stephen T. & McCloskey, Deirdre N., 2004. "Size matters: the standard error of regressions in the American Economic Review," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 33(5), pages 527-546, November.
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    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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