On the measurement of importance
When cost-benefit analysis is infeasible, most empirical papers use standardized beta coefficients, Shapley values, or partial R2 to demonstrate that their relationship of interest is economically important or economically significant. I show that these measures of importance are flawed, and therefo...
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| Format: | Working paper |
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2019
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| Summary: | When cost-benefit analysis is infeasible, most empirical papers use standardized beta coefficients, Shapley values, or partial R2 to demonstrate that their relationship of interest is economically important or economically significant. I show that these measures of importance are flawed, and therefore propose two new approaches to measure importance. While the ceteris paribus approach captures the independent effect of a regressor on the dependent variable, the non-ceteris paribus approach explicitly considers whether this effect is reinforcing or going against the effects of other correlated variables. I apply these complementary methods to assess the importance of the determinants of long-run growth. |
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