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

Author

Listed:
  • Holgersson, Thomas

    (Jönköping International Business School, and Linnaeus University)

  • Norman, Therese

    (Jönköping International Business School)

  • Tavassoli, Sam

    (Blekinge Institute of Technology)

Abstract

Economic significance is frequently assessed through statistical hypothesis testing. This habitual use is, however, usually not matching with the implicit economical questions being addressed. In this paper 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

  • Holgersson, Thomas & Norman, Therese & Tavassoli, Sam, 2013. "In the quest for economic significance: Assessing variable importance through mean value decomposition," Working Paper Series in Economics and Institutions of Innovation 326, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    • Handle: RePEc:hhs:cesisp:0326
    as

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    References listed on IDEAS

    as
    1. Deirdre N. McCloskey & Stephen T. Ziliak, 1996. "The Standard Error of Regressions," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 97-114, March.
    2. Stephen T. Ziliak & Deirdre N. McCloskey, 2004. "Size Matters: The Standard Error of Regressions in the American Economic Review," Econ Journal Watch, Econ Journal Watch, vol. 1(2), pages 331-358, August.
    3. Luigi Fabbris, 1980. "Measures of predictor variable importance in multiple regression: An additional suggestion," Quality & Quantity: International Journal of Methodology, Springer, vol. 14(6), pages 787-792, December.
    4. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
    5. Zimmerman, David J, 1992. "Regression toward Mediocrity in Economic Stature," American Economic Review, American Economic Association, vol. 82(3), pages 409-429, June.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Duqi, Andi & Jaafar, Aziz & Warsame, Mohammed H., 2020. "Payout policy and ownership structure: The case of Islamic and conventional banks," The British Accounting Review, Elsevier, vol. 52(1).

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    More about this item

    Keywords

    Conditioning; Economic significance; Regression analysis; Mean Value Decomposition; Goodness-of-Fit;
    All these keywords.

    JEL classification:

    • 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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