Author: Paul Hünermund

Econometrics: When Everybody is Different

Nowadays everybody is talking about heterogeneous treatment effects. That is, response to an economic stimulus that varies across individuals in a population. However, so far the discussion was concentrated on the instrumental variable setting where a randomized (natural or administered) experiment affects the treatment status of a so-called complier population. An average of the individual treatment effects can only be estimated for this group of compliers. Instead, for the always and never-takers we cannot say anything. But if individual treatment responses are different for everybody in the population, how can we be sure that what we’re estimating for the compliers is representative for the whole population? Continue reading Econometrics: When Everybody is Different

Don’t get your p-values wrong

Seems like Andrew Gelman found some fellow campaigners against the inappropriate use of p-values and null hypothesis significance testing in science. The American Statistical Association now published a press release with a link to a paper forthcoming in The American Statistician. Here is the take-home message:

  1. P-values can indicate how incompatible the data are with a specified statistical model.
  2. P-values do not measure the probability that the studied hypothesis is true, or the probability that the data were produced by random chance alone.
  3. Scientific conclusions and business or policy decisions should not be based only on whether a p-value passes a specific threshold.
  4. Proper inference requires full reporting and transparency.
  5. A p-value, or statistical significance, does not measure the size of an effect or the importance of a result.
  6. By itself, a p-value does not provide a good measure of evidence regarding a model or hypothesis.

It’s about time that an association with a leverage like the ASA makes a clear statement and takes the topic out of the blogosphere. Especially the second point, an insignificant test does not mean that there is no effect, is a widespread misconception. My feeling is that it will still take a while to finally get rid of it.

I always find it shocking how difficult it is to explain the concept of statistical uncertainty to statistically untrained persons. (Obviously I’m the one to blame if I can’t get my point across.) Recently I was working on a policy report and we had to conduct an econometric analysis on the basis of a rather small sample. In the end we found a bunch of insignificant results, which is not surprising. In the results section I therefore tried to formulate things defensively. I mentioned that based on our analysis we’re unable to decide whether effects are just very small (and therefore statistically compatible with a null hypothesis of being zero) or whether the variation in the data, as a result of the low number of observations, is just too large. Our clients, however, we’re not happy about this interpretation because they expected a clear testimony from our side. Essentialy, they wanted us to make a yes-or-no decision which in some situations is very difficult based purely on statistical grounds.

There is another very interesting suggestion in the paper. I wonder how long it will take for the following to become popular:

One need not formally carry out multiple statistical tests for this problem to arise: Whenever a researcher chooses what to present based on statistical results, valid interpretation of those results is severely compromised if the reader is not informed of the choice and its basis. Researchers should disclose the number of hypotheses explored during the study…

Political Trust of Immigrants

Anecdotical evidence tells me that immigrants from less developed countries exhibit lower levels of trust in the political institutions of their host countries than the native-born population. Immigrants vote less and seem to have less trust in the government and local politicians. Especially in the Arab world, conspiracy theories are widespread and they find their way into the public discourse of the host countries. Continue reading Political Trust of Immigrants

Russian Attitudes Towards Markets and Democracy

This interesting research by Maxim Boycko and nobel prize laureate Bob Shiller comes with great timing to inform the debate about supposed differences in values between East and West. Here’s the paper’s abstract with the most interesting conclusion in emphasis: Continue reading Russian Attitudes Towards Markets and Democracy

Advertising fail: the case of parship.de

Winter can be a hard time for singles. It’s cold outside, there’s nobody to cuddle with and it sucks to go to family parties all alone. Perfect time for dating websites to flood the city with advertising. These posters by parship.de, who claims to be the largest online meeting point for singles in Germany, can be found everywhere these days: Continue reading Advertising fail: the case of parship.de

Recent innovation trends in the German economy

In my institute we’re conducting the German part of the Community Innnovation Survey–a pan-European survey about the R&D activities of firms. This week the final report for the 2015 survey wave got published with data for 2012 until 2014. It shows that not much has changed in 2014 compared to 2013. In total, German firms spent 145 billion euro on reserach and innovation activities. Continue reading Recent innovation trends in the German economy

“Immigration and the Diffusion of Technology: The Huguenot Diaspora in Prussia,” E. Hornung (2014)

Initially I wanted to write about this interesting paper here. One part of my family descends from Huguenot immigrants to Königsberg/Prussia. So it has a very personal notion to me too. But then found out that Kevin Bryan already has a post about it to which I have not much to add.

afinetheorem's avatarA Fine Theorem

Is immigration good for natives of the recipient country? This is a tough question to answer, particularly once we think about the short versus long run. Large-scale immigration might have bad short-run effects simply because more L plus fixed K means lower average incomes in essentially any economic specification, but even given that fact, immigrants bring with them tacit knowledge of techniques, ideas, and plans which might be relatively uncommon in the recipient country. Indeed, world history is filled with wise leaders who imported foreigners, occasionally by force, in order to access their knowledge. As that knowledge spreads among the domestic population, productivity increases and immigrants are in the long-run a net positive for native incomes.

How substantial can those long-run benefits be? History provides a nice experiment, described by Erik Hornung in a just-published paper. The Huguenots, French protestants, were largely expelled from France after the Edict of Nantes…

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Opinion: Eastern Europe’s Xenophobia is Understandable

From the foreword of my Christmas present by Almantas Samalavičius:

Lithuania was ruled by a foreign colonial regime that consciously and maliciously ravaged and ruined the country’s cultural and religious institutions, crippled collective historical memory and fiercely suppressed (but fortunately did not extinguish) even the merest manifestations of a desire for freedom.

Continue reading Opinion: Eastern Europe’s Xenophobia is Understandable