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Beyond the Stars

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  • Olivier Sterck

Abstract

It is frequent to hear in economic seminars or read in academic papers that an effect is economically significant or economically important. Yet, the economic literature is vague on what economic importance means and how it should be measured. In this paper, I show that existing measures of economic importance are flawed and misused. Using an axiomatic approach, I derive a new method to assess the economic importance of each variable in linear regressions. The new measure is interpreted as the percentage contribution of each explanatory variable to deviations in the dependent variable. As an illustration, the method is applied to the study of the causes of long-run economic development.

Suggested Citation

  • Olivier Sterck, 2017. "Beyond the Stars," CSAE Working Paper Series 2016-31-2, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:2016-31-2
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    File URL: https://ora.ox.ac.uk/objects/uuid:19e9b9e4-b099-41ed-9ade-2cd9c15bcbf9
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    Cited by:

    1. Jules Gazeaud & Eric Mvukiyehe & Olivier Sterck, 2023. "Cash Transfers and Migration: Theory and Evidence from a Randomized Controlled Trial," The Review of Economics and Statistics, MIT Press, vol. 105(1), pages 143-157, January.
    2. Hoeffler, Anke & Sterck, Olivier, 2022. "Is Chinese aid different?," World Development, Elsevier, vol. 156(C).
    3. Olivier Sterck, 2018. "On the economic importance of the determinants of long-term growth," CSAE Working Paper Series 2018-20, Centre for the Study of African Economies, University of Oxford.
    4. Oliinyk, Olena & Mishchuk, Halyna & Bilan, Yuriy & Skare, Marinko, 2022. "Integrated assessment of the attractiveness of the EU for intellectual immigrants: A taxonomy-based approach," Technological Forecasting and Social Change, Elsevier, vol. 182(C).
    5. Lin, Boqiang & Guan, Chunxu, 2023. "Evaluation and determinants of total unified efficiency of China's manufacturing sector under the carbon neutrality target," Energy Economics, Elsevier, vol. 119(C).

    More about this item

    Keywords

    Regression; Economic importance; Effect size; Standardized beta coefficients; Long-run growth;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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