For an economist, ultimate goals of neuroeconomic research include improving economic policy analysis. One path toward this goal is to use neuroeconomic data to advance economic theory, and productive efforts have been made towards that end. Equally important, though less studied, is how neuroeconomics can provide quantitative evidence on policy, and in particular the way in which it might inform structural econometric inference. This paper is a first step in that direction. We suggest here that key forms of preference (or (...) decision strategy) heterogeneity can be identified by brain imaging studies and, consequently, linked stochastically to observable individual characteristics. Then, recognizing that brain-imaging studies are substantially costly, we derive conditions under which the probabilistic link between observable characteristics and type, a quantity critical to policy analysis, can be estimated more precisely by combining data from traditional and brain-based decision studies. (shrink)

The most plausible of Yarkoni's paths to recovery for psychology is the least radical one: psychologists need truly quantitative methods that exploit the informational power of variance and heterogeneity in multiple variables. If they drop ambitions to explain entire behaviors, they could find a box full of design and econometric tools in the parts of experimental economics that don't ape psychology.

In economics, thought experiments are frequently justified by the difficulty of conducting controlled experiments. They serve several functions, such as establishing causal facts, isolating tendencies, and allowing inferences from models to reality. In this paper, I argue that thought experiments served a further function in economics: facilitating the quantitative definition and measurement of the theoretical concept of utility, thereby bridging the gap between theory and statistical data. I support my argument by a case study, the “hypothetical experiments” of the Norwegian (...) economist Ragnar Frisch (1895-1973). Frisch aimed to eliminate introspection and a subjective concept of utility from economic reasoning. At the same time, he sought behavioral foundations for economic theory that enabled quantitative reasoning. By using thought experiments to justify his set of choice axioms and facilitating the operationalization of utility, Frisch circumvented the problem of observing utility via actual experiments without eliminating the concept of utility from economic theory altogether. As such, these experiments helped Frisch to empirically support the theory’s most important results, such as the laws of demand and supply, without the input of new empirical findings. I suggest that Frisch’s experiments fulfill the main characteristics of thought experiments. (shrink)

This study aims to shed light on the relationship between individual and regional Christian religion and individual sustainable behaviors in an exploratory manner, with a special focus on sustainable consumption and investment decisions. To this end, we econometrically analyze online representative survey data that contains information on the self-reported importance of the consideration of ecological and social/ethical criteria in the context of a large variety of individual behaviors. The target group are financial decisions makers in German households, i.e., important actors (...) in the largest economy in Europe. Results of the econometric analysis suggest that Christian religion is positively related to a variety of ecological and social/ethical activities. Our findings empirically support explanations postulating a positive relationship between Christian religion and environmental behavior, such as the stewardship hypothesis, rather than opposite theories like White’s :1203–1207, 1967) dominion hypothesis. Particularly, we find that both individual and regional measures for Christian religion positively affect various behaviors emphasizing the importance of individual and contextual norms for individual behavior. Hence, we provide empirical evidence for the importance of Christian religion for another country than the USA, which is typically in the focus of similar studies. Our results can be used for targeted information campaigns by politicians to enhance sustainable behaviors or acceptance for related policy measures. (shrink)

This book studies the impact of corporate planning and implementation procedures on the level of corporate capital investment. It stands among the few studies within the behavioural economics tradition that employ direct examination of corporate decision processes to address variables of central concern in conventional economics. In addition, by using a combination of qualitative data from interviews and corporate documents along with econometric analysis of corporate plans and actual outcomes, the study makes a substantial methodological advance. Along with the methodological (...) advance comes a different conception of the determinants of corporate capital investment. The findings of this study have implications for research and practice in economics, corporate strategy and public policy. As such, Corporate Capital Investment will be of interest to scholars and practitioners of all disciplines who are seriously concerned with corporate capital investment. (shrink)

Community supported agriculture programs are transforming the way people relate to food and agriculture. Many researchers have considered the transformative potential of CSAs on economic, social, and environmental relations. They illustrate how participants are embedded in broader political economic transformations. The same focus, however, has not been given to CSAs’ transformative impact on individual shareholders—especially in terms of their relationship to food and health. We draw together literatures from behavioral economics, econometrics, and political ecology to evaluate the potential (...) impacts of CSA participation on food lifestyle behaviors. Using primary data drawn from a survey of four groups with distinct food acquisition environments, we compare respondents’ self-assessed food-related behaviors along three different categories: produce versus processed food consumption, food away from home consumption, and food acquisition and interest in nutrition. By documenting between-group differences, we confirm that shareholders display significant absolute differences to other groups along numerous indicators related to the above-stated categories and in general assessments of health. These differences correspond directionally to behaviors public health officials identify as correlated to beneficial health outcomes. We conclude by theorizing how the food environments delineated by a CSA exchange relationship provide unique reflexive opportunities for participants to develop diverse food-related skills and behaviors. (shrink)

We develop an extension of the familiar linear mixed logit model to allow for the direct estimation of parametric non-linear functions defined over structural parameters. Classic applications include the estimation of coefficients of utility functions to characterize risk attitudes and discounting functions to characterize impatience. There are several unexpected benefits of this extension, apart from the ability to directly estimate structural parameters of theoretical interest.

Conviction Narrative Theory (CNT) is a theory of choice underradical uncertainty– situations where outcomes cannot be enumerated and probabilities cannot be assigned. Whereas most theories of choice assume that people rely on (potentially biased) probabilistic judgments, such theories cannot account for adaptive decision-making when probabilities cannot be assigned. CNT proposes that people usenarratives– structured representations of causal, temporal, analogical, and valence relationships – rather than probabilities, as the currency of thought that unifies our sense-making and decision-making faculties. According to CNT, (...) narratives arise from the interplay between individual cognition and the social environment, with reasoners adopting a narrative that feels “right” to explain the available data; using that narrative to imagine plausible futures; and affectively evaluating those imagined futures to make a choice. Evidence from many areas of the cognitive, behavioral, and social sciences supports this basic model, including lab experiments, interview studies, and econometric analyses. We identify 12 propositions to explain how the mental representations (narratives) interact with four inter-related processes (explanation, simulation, affective evaluation, and communication), examining the theoretical and empirical basis for each. We conclude by discussing how CNT can provide a common vocabulary for researchers studying everyday choices across areas of the decision sciences. (shrink)

The rise of behavioral economics since the 1980s led to richer mutual influence between economic and psychological theory and experimentation. However, as behavioral economics has become increasingly integrated into the main stream in economics, and as psychology has remained damagingly methodologically conservative, this convergence has recently gone into reverse. At the same time, growing appreciation among economists of the limitations of atomistic individualism, along with advantages in econometric modeling flexibility by comparison with psychometrics, is leading economists to become (...) more pluralistic than psychologists about the ontology of behavioral causation and structures. This, combined with economists’ growing interest in network models, is drawing economists closer in theory and practice to sociologists who use quantitative or mixed methods. (shrink)

Terror may have dire implications for the public’s behavior. According to Kirschenbaum (J Homel Secur Emerg Manag 3(1/3):1–33, 2006), in order to minimize the expected impact of a terror incident the public has to adopt a “survival strategy”. According to the underlying research hypothesis of the study, the longer the terror incidents continue, the more the public accepts the possibility that it will be in this situation for the long term; therefore, the extent of its deviation from its ordinary consumer (...) behavior steadily declines after each terror incident. By using daily trade data and an Event Studies econometric methodology, we found the existence of an adaptation trend among the consumer public. Thus, over time, the Israeli public internalized the realization that if it wishes to sustain a reasonable standard of living, it must minimize the disparity between its consumer economic behavior before a terror event and its behavior afterwards. Announcing more assassinations of terrorists was found to calm the public’s fears, when fears are judged by a return to more normal consumption patterns. Another finding is the existence of variance in the pace of this adaptation as a dependency of the type of good consumed: consistently, the adaptation is faster in regard to non-durable goods than to durable goods. This outcome is subject to interpretation, since durable goods may be viewed as “half-consumption goods, half-capital goods,” it stands to reason that capital goods would be more strongly affected than consumption goods. (shrink)

Little is known about how ambiguity attitudes change when consequences are flipped from gains to losses, particularly in the context of natural sources. Focusing on two such sources of uncertainty - the voter participation rates in the 2019 European elections in France and the UK - we report econometric estimations that jointly capture parametric specifications of attitudes and beliefs in the gain and loss domains. For checking purposes, we also compute indexes of ambiguity attitudes proposed by Baillon et al. (2018). (...) According to our data, attitudes in the loss domain can be inferred from those in the gain domain. Our findings show no significant differences in attitudes between the two natural sources. Furthermore, we observe no differences in beliefs for both sources, regardless of the outcome sign. Our method, which focuses on matching probabilities, offers an efficient approach for investigating ambiguity attitudes and beliefs for natural sources of uncertainty across gains and losses, particularly beneficial in field studies where data collection capabilities may be limited. (shrink)

Alongside other types of mass atrocities, genocide has received extensive scholarly, policy, and practitioner attention. Missing, however, is the contribution of economists to better understand and prevent such crimes. This edited collection by 41 accomplished scholars examines economic aspects of genocides, other mass atrocities, and their prevention. Chapters include numerous case studies, probing literature reviews, and completely novel work based on extraordinary country-specific datasets. Also included are chapters on the demographic, gendered, and economic class nature of genocide. Replete with research- (...) and policy-relevant findings, new insights are derived from behavioral economics, law and economics, political economy, macroeconomic modeling, microeconomics, development economics, industrial organization, identity economics, and other fields. Analytical approaches include constrained optimization theory, game theory, and sophisticated statistical work in data-mining, econometrics, and forecasting.A foremost finding of the book concerns atrocity architects' purposeful, strategic use of violence, often manipulating nonrational proclivities among ordinary people to sway their participation in mass murder. Relatively understudied in the literature, the book also analyzes the options of victims before, during, and after mass violence. Further, the book shows how well-intended prevention efforts can backfire and increase violence, how wrong post-genocide design can entrench vested interests to reinforce exclusion of vulnerable peoples, and how businesses can become complicit in genocide. In addition to the necessity of healthy opportunities in employment, education, and key sectors in prevention work, the book shows why new genocide prevention laws and institutions must be based on reformulated incentives that consider insights from law and economics, behavioral economics, and collective action economics. (shrink)

Increasingly in economics what had been considered to be unusual and unacceptable has come to be considered usual and acceptable, if not necessarily desirable. Whereas it had been widely believed that economic reality could be reasonably described by sets of pairs of linear supply and demand curves intersecting in single equilibrium points to which markets easily and automatically moved, now it is understood that many markets and situations do not behave so well. Economic reality is rife with nonlinearity, discontinuity, and (...) a variety of phenomena that are not so easily predicted or understood. At the same time the broad coherence of economic systems is more impressive than ever in the face of such phenomena. The order of the economy appears to emerge from the complex interactions that constitute the evolutionary process of the economy. These phenomena have come to be labeled as complexity in economics. Even what seems simple in economics generally arises from behavior not reflecting rational expectations; we live in a world that reflects the enormous variety and diversity of humanity in their knowledge, attitudes, and behaviors, interacting with each other in an enormous range of institutional frameworks. What emerges in the aggregate may have little to do with what happens at the individual level. But this aggregate cannot be simply described by some set of aggregate equations. It emerges out of the soup of the individual and particular with all its multiform interactions and peculiarities. (shrink)

Experimental data on social preferences present a number of features that need to be incorporated in econometric modelling. We explore a variety of econometric modelling approaches to the analysis of such data. The approaches under consideration are: the Random Utility approach ; the Random Behavioural approach ; and the Random Preference approach. These approaches are applied in various ways to an experiment on fairness conducted by Cappelen et al. :818–827, 2007). Various models that we estimate succeed in capturing the key (...) features of the dataset. Conclusions concerning fairness-related behaviour depend crucially on the choice of econometric model. (shrink)

Reichenbach's 'principle of the common cause' is a foundational assumption of some important recent contributions to quantitative social science methodology but no similar principle appears in econometrics. Reiss (2005) has argued that the principle is necessary for instrumental variables methods in econometrics, and Pearl (2009) builds a framework using it that he proposes as a means of resolving an important methodological dispute among econometricians. We aim to show, through analysis of the main problem instrumental variables methods are used (...) to resolve, that the relationship of the principle to econometric methods is more nuanced than implied by previous work, but nevertheless may make a valuable contribution to the coherence and validity of existing methods. (shrink)

Reichenbach’s ‘principle of the common cause’ is a foundational assumption of some important recent contributions to quantitative social science methodology but no similar principle appears in econometrics. Angrist et al. has argued that the principle is necessary for instrumental variables methods in econometrics, and Angrist Krueger builds a framework using it that he proposes as a means of resolving an important methodological dispute among econometricians. Through analysis of instrumental variables methods and the issue of multicollinearity, we aim to (...) show that the relationship of the principle to econometric methods is more nuanced than implied by previous work but nevertheless may make a valuable contribution to the coherence and validity of existing methods. (shrink)

Econometrics applies statistical methods to study economic phenomena. Roughly, by means of equations, econometricians typically account for the response variable in terms of a number of explanatory variables. The question arises under what conditions econometric models can be given a causal interpretation. By drawing the distinction between associational models and causal models, the paper argues that a proper use of background knowledge, three distinct types of assumptions (statistical, extra-statistical, and causal), and the hypothetico-deductive methodology provide sufficient conditions for a (...) causal interpretation of econometric models. (shrink)

This chapter gives a concrete example of a question of current scientific interest where capacities matter: ‘Do the Bell inequalities describing Einstein–Podolsky–Rosen experiments show that causality is incompatible with quantum mechanics?’ The question cannot be answered if we rely on probabilistic theories of causality and laws of associations alone. It takes the concept of capacity and related notions of how capacities operate even to formulate the problem correctly. Econometrics models with correlated errors, it is shown, can explain the EPR (...) results when the correlations are given a capacity interpretation. (shrink)

Econometric Theory and Methods International Edition provides a unified treatment of modern econometric theory and practical econometric methods. The geometrical approach to least squares is emphasized, as is the method of moments, which is used to motivate a wide variety of estimators and tests. Simulation methods, including the bootstrap, are introduced early and used extensively. The book deals with a large number of modern topics. In addition to bootstrap and Monte Carlo tests, these include sandwich covariance matrix estimators, artificial regressions, (...) estimating functions and the generalized method of moments, indirect inference, and kernel estimation. Every chapter incorporates numerous exercises, some theoretical, some empirical, and many involving simulation. (shrink)

The purpose of the study is to establish a causal relationship between job satisfaction in the field of education in the Russian Federation, depending on the satisfaction with: working conditions; opportunities for professional growth; remuneration. The article deals with the problem of modeling socio-economic satisfaction with work in the field of education. Based on the correlation analysis, linear and nonlinear models of the interrelationships of factors related to this problem are formed. Econometric models have been developed to effectively assess the (...) level of job satisfaction of employees employed in the field of education. The scientific novelty lies in the study of new models that are statistically superior to domestic developments in this field of activity. As a result, the most significant factors affecting the level of job satisfaction were identified. (shrink)

The purpose of the study is to establish a causal relationship of job satisfaction depending on the average number of employees, the level of wages, the number of applications and the time factor. The article deals with the problem of modeling socio-economic satisfaction with the work of employees in the provision of public services. Based on the correlation analysis, linear and nonlinear models of the interrelationships of factors related to this problem are formed. Econometric models have been developed to effectively (...) assess the level of satisfaction of employees in the provision of public services. The scientific novelty lies in the study of new models that are statistically superior to domestic developments in this field of activity. As a result, the most significant factors affecting the level of job satisfaction were identified. (shrink)

The purpose of the study is to determine the relationship between the economic well-being of countries and their openness to external markets. The scientific novelty consists in the comparison of two groups of countries with different characteristics and identifying specific patterns of the impact of selected macroeconomic factors on GDP. The article presents an econometric analysis and contains regression equations for each state. Interpretation of the coefficients of the derived models makes it possible to estimate changes in GDP with the (...) change of indicators. As a result, it was revealed that export is the most stable and strongly influencing the economy of all countries macroeconomic factor, and the strength of influence depends on the level of development of the country. The stability of GDP in developing countries is largely achieved through the regulation of internal factors, and in developed countries through exports regulation. (shrink)

Ragnar Frisch received the first Nobel Memorial Prize in Economic Science together with Jan Tinbergen in 1969 for having played an important role in ensuring that mathematical techniques figure prominently in modern economic analysis. Frisch was also a co-founder of the Econometric Society in 1930, the inaugural editor of its journal Econometrica for over 20 years, and a major figure in Norwegian academic life. This collection of essays derived from the centennial symposium which marked Frisch's birth explores his contributions to (...) econometrics and other key fields in the discipline as well as the results of new research. Contributors include eminent scholars from Europe, the United Kingdom and North America who investigate themes in utility measurement, production theory, microeconomic policy, econometric methods, macrodynamics, and macroeconomic planning. (shrink)

Introduction. The fourth industrial revolution significantly changes the structure of economic relations and transforms the importance of factors in the development of territories. The purpose of the article is to identify the most significant factors in the regional development of the Ural macro region in the context of the fourth industrial revolution and to determine the directions of impacts to ensure the competitiveness and long-term growth of territories. Methods. The methodological basis of the study is based on a set of (...) scientific approaches to economic growth, concepts of regional and institutional economics. Research methods include regional, comparative and econometric factor analysis. Scientific novelty of the study. A method for identifying the significance of factors in the development of regions is proposed and the key factors for developing the subjects of the Ural macro region in the context of the fourth industrial revolution are established. The study contributes to the scientific debate on the meaning and management of institutional development factors. Results. The author presents the results of diagnosing the regulatory environment and geographic factors of the subjects of the Ural macro region. An econometric analysis of their impact on economic development has been carried out. The statistical significance for developing the volume of mining and the quality of the legal environment in the regions has been established. Informal institutions (the authors explain the phenomenon by weak differentiation of cultural characteristics and business practices of regions due to their historical connectivity) and transport and geographical location (due to a decrease in spatial influence and an increase in the role of digital technologies in production chains in Industry 4.0). Conclusions. In the Sverdlovsk and Chelyabinsk regions, it was possible to ensure higher values of GRP per capita due to a favorable regulatory environment. In general, in the Russian regions in the second decade of the 21st century, the raw material orientation remains (among the studied objects, the economies of the Orenburg region and Udmurtia are the most extractive). To ensure the country’s long-term development, it is necessary to create a favorable business climate: improving the legal environment in the areas outlined in the study, increasing the level of trust and reducing the level of corruption. (shrink)

Originally published in 1981, this book considers one particular area of econometrics- the linear model- where significant recent advances have been made. It considers both single and multiequation models with varying co-efficients, explains the various theories and techniques connected with these and goes on to describe the various applications of the models. Whilst the detailed explanation of the models will interest primarily econometrics specialists, the implications of the advances outlined and the applications of the models will intrest a (...) wide range of economists. (shrink)

The book covers both the theory and the applications aspects of econometric theory with reference to India/developing countries. It is comprehensive in its coverage of topics, contains exercises and solved examples and uses applications, detailed illustrative examples from the Indian economy, and data, both from India and the West.Twenty-three chapters spread over eight parts take students from methodology to the statistical foundations and then lead into general models, advanced econometrics, and the newer areas of study.

We explore the connection between four major inferential paradigms in statistical science and inferential practice in current econometrics. We develop the argument that econometrics is still largely characterized by John Stuart Mill’s conception of statistical inference from data, who saw a distinction between ‘theorists’ and ‘practical men’. We follow up with a review of all empirical papers published in the Top 5 economics journals in the period 2000–2018 (N = 2,258). In spite of Rodrik’s [(2015). Economics rules: The (...) rights and wrongs of the dismal science. W. W. Norton & Company] much-debated notion of economics that sees issues of model selection at the core of the discipline, the ‘theory first’ / ‘pre-eminence of theory’ approach vastly dominates in the sample (94.0%). When model selection and model uncertainty is accounted for, this largely happens under the frequentist statistical paradigm. This finding may be explained by frequentism’s special role as an ‘orientational paradigm’ (Hoyningen-Huene and Kincaid, [2023]. What makes economics special: Orientational paradigms. Journal of Economic Methodology, 30(2), 188–202) in economics. (shrink)

L'article étudie diverses strates épistémiques de raisonnement stochastique à l'oeuvre dans l'économétrie actuelle et dans les méthodes économiques: (1) le niveau argumentatif; (2) le raisonnement fondé sur l'analogie avec les jeux de hasard; (3) les modèles basés sur le calcul analytique des probabilités, où le phénomène est tenu pour centré, son incertitude étant maîtrisée par un bruit blanc quant à sa fluctuation; (4) le calcul axiomatique. L'intrication de ces strates est observée. L'article appelle à un renforcement de la réflexion critique (...) à ce sujet parmi les spécialistes. Il introduit ce faisant le concept d'artefact cognitif stochastique. (shrink)

Social research, from economics to demography and epidemiology, makes extensive use of statistical models in order to establish causal relations. The question arises as to what guarantees the causal interpretation of such models. In this paper we focus on econometrics and advance the view that causal models are ‘augmented’ statistical models that incorporate important causal information which contributes to their causal interpretation. The primary objective of this paper is to argue that causal claims are established on the basis of (...) a plurality of evidence. We discuss the consequences of ‘evidential pluralism’ in the context of econometric modelling. (shrink)

Cartwright and Humphreys have suggested theories of probabilistic causation for singular events, which are based on modifications of traditional causal linear modelling. On the basis of her theory, Cartwright offered an allegedly local, and non-factorizable, common-cause model for the EPR experiment. In this paper I consider Cartwright's and Humphreys' theories. I argue that, provided plausible assumptions obtain, local models for EPR in the framework of these theories are committed to Bell inequalities, which are violated by experiment.

Founded in 1920, the NBER is a private, non-profit, non-partisan organization dedicated to conducting economic research and to disseminating research findings among academics, public policy makers, and business professionals.

Sharpe’s ratio is the most widely used index for establishing an order of priority for the portfolios to which the investor has access, and the purpose of this investigation is to verify that Sharpe’s ratio allows decisions to be made in investment portfolios considering different financial market conditions. The research is carried out by autoregressive model of the financial series of returns using Sharpe’s ratio for evaluations looking over the priority of financial assets which the investor can access while observing (...) the effects that can cause autocorrelated series in evaluation measures for financial assets. The results presented in this study confirm the hypothesis proposed in which Sharpe’s ratio allows decisions to be made in the selection of investment portfolios under normal conditions thanks to the definition of a robustness function, whose empirical estimation shows an average 73% explanation of the variance in the degradation of the Spearman coefficient for each of the performance measures; however, given the presence of autocorrelation in the financial series of returns, this similarity is broken. (shrink)

This three volume set contains papers presented at the Seventh World Congress of the Econometric Society. The first volume contains three papers presented at the Seventh World Congress of the Econometric Society which summarize and interpret key recent developments and discuss current and future directions in a wide range of topics in economics and econometrics. They cover both theory and applications. Authored by leading specialists in their fields, these volumes provide a unique survey of progress in the discipline. The (...) second volume comprising three papers which examine the latest developments in economic theory, applied economics and econometrics presented at the Seventh World Congress of the Econometric Society in Tokyo in August 1995. The topics were carefully selected to represent the most active fields in the discipline over the past five years. Written by the leading authorities in their fields, each paper provides a unique survey of the current state of knowledge in economics. Designed to make the material accessible to a general audience of economists, these volumes should be helpful to anyone with a good undergraduate training in economics who wishes to follow new ideas and tendencies in the subject. The third of three volumes contains papers presented at the Seventh World Congress of the Econometric Society. The papers summarize and interpret key recent developments and discuss current and future directions in a wide range of topics in economics and econometrics. They cover both theory and applications. Authored by leading specialists in their fields, these volumes provide a unique survey of progress in the discipline. (shrink)

Is behavioral integration a necessary feature of belief in folk psychology? Our data from over 5,000 people across 26 samples, spanning 22 countries suggests that it is not. Given the surprising cross-cultural robustness of our findings, we argue that the types of evidence for the ascription of a belief are, at least in some circumstances, lexicographically ordered: assertions are first taken into account, and when an agent sincerely asserts that p, nonlinguistic behavioral evidence is disregarded. In light of (...) this, we take ourselves to have discovered a universal principle governing the ascription of beliefs in folk psychology. (shrink)

‘Noise’ in this study, in the sense of evolutionary game theory, refers to deviations from prevailing behavioral rules. Analyzing data from a laboratory experiment on coordination in networks, we tested ‘what kind of noise’ is supported by behavioral evidence. This empirical analysis complements a growing theoretical literature on ‘how noise matters’ for equilibrium selection. We find that the vast majority of decisions constitute myopic best responses, but deviations continue to occur with probabilities that are sensitive to their costs, (...) that is, less frequent when implying larger payoff losses relative to the myopic best response. In addition, deviation rates vary with patterns of realized payoffs that are related to trial-and-error behavior. While there is little evidence that deviations are clustered in time or space, there is evidence of individual heterogeneity. (shrink)

The small sample properties of estimators and tests are frequently too complex to be useful or are unknown. Much econometric theory is therefore developed for very large or asymptotic samples where it is assumed that the behaviour of estimators and tests will adequately represent their properties in small samples. Refined asymptotic methods adopt an intermediate position by providing improved approximations to small sample behaviour using asymptotic expansions. Dedicated to the memory of Michael Magdalinos, whose work is a major contribution to (...) this area, this book contains chapters directly concerned with refined asymptotic methods. In addition, there are chapters focusing on new asymptotic results; the exploration through simulation of the small sample behaviour of estimators and tests in panel data models; and improvements in methodology. With contributions from leading econometricians, this collection will be essential reading for researchers and graduate students concerned with the use of asymptotic methods in econometric analysis. (shrink)

The difficulty of conducting relevant experiments has long been regarded as the central challenge to learning about the economy from data. The standard solution, going back to Haavelmo's famous “The Probability Approach in Econometrics” (1944), involved two elements: first, it placed substantial weight on a priori theory as a source of structural information, reducing econometric estimates to measurements of causally articulated systems; second, it emphasized the need for an appropriate statistical model of the data. These elements are usually seen (...) as tightly linked. I argue that they are, to a large extent, separable. Careful attention to the role of an empirically justified statistical model in underwriting probability explains puzzles not only in economics, but more generally with respect to recent criticisms of Reichenbach's principle of the common cause, which lies behind graph-theoretic causal search algorithms. And it provides an antidote to the pessimistic understanding of the possibilities for passive observation of causal structure in econometrics and related areas of Nancy Cartwright and others. (shrink)

This is the third of three volumes containing edited versions of papers and commentaries presented in invited symposium sessions of the Eighth World Congress of the Econometric Society. The papers summarize and interpret recent developments and discuss future directions in a wide range of topics in economics and econometrics. The papers cover both theory and applications. Written by leading specialists in their fields, these volumes provide a unique survey of progress in the discipline.

The objective of the paper is threefold. First, to argue that some of Haavelmo's methodological ideas and insights have been neglected because they are largely at odds with the traditional perspective that views empirical modeling in economics as an exercise in curve-fitting. Second, to make a case that this neglect has contributed to the unreliability of empirical evidence in economics that is largely due to statistical misspecification. The latter affects the reliability of inference by inducing discrepancies between the actual and (...) nominal error probabilities. Third, to argue that the ‘bridge pier’ between theory and data, as envisaged by Haavelmo, T [The Probability Approach to Econometrics, Econometrica, 12, 1–115], can be completed by blending some of his key methodological ideas and insights into a refined/extended version of the frequentist approach to inference. This new perspective is used to revisit dynamic stochastic general equilibrium modeling in an attempt to bring.. (shrink)

This is the second of three volumes containing edited versions of papers and commentaries presented in invited symposium sessions of the Eighth World Congress of the Econometric Society. The papers summarize and interpret key developments and discuss future directions in a wide range of topics in economics and econometrics. The papers cover both theory and applications. Written by leading specialists in their fields, these volumes provide a unique survey of progress in the discipline.

Drawing on current debates at the frontiers of economics, psychology, and political philosophy, this book explores the challenges that arise for liberal democracies from a confrontation between modern technologies and the bounds of human rationality. With the ongoing transition of democracy's underlying information economy into the digital space, threats of disinformation and runaway political polarization have been gaining prominence. Employing the economic approach informed by behavioral sciences' findings, the book's chief concern is how these challenges can be addressed while (...) preserving a commitment to democratic values and maximizing the epistemic benefits of democratic decision-making. The book has two key strands: it provides a systematic argument for building a behaviorally informed theory of democracy; and explores how scientific knowledge on quirks and bounds of human rationality can inform the design of resilient democratic institutions. Drawing these together, the book explores the centrality of the rationality assumption in the methodological debates surrounding behavioral sciences as exemplified by the dispute between neoclassical and behavioral economics; the role of rationality in democratic social choice; behaviorally informed paternalism as a response to the challenge of irrationality; and non-paternalistic avenues to increase the resilience of the democratic institutions towards political irrationality This book is invaluable reading for anyone interested in behavioral economics and sciences, political philosophy and the future of democracy. (shrink)