Beyond the Stars

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. I derive a new metric that measures, in percentage terms, the contribution of each explanatory variable to deviations in the dependent variable, ceteris paribus. As an illustration, the method is applied to study the determinants of migration and the determinants of fertility.

Meta-analysis in finance research: Opportunities, challenges, and contemporary applications

“…Allied to the challenge of heterogeneity is the dwindling credibility of empirical research. In many fields of science, we see growing skepticism towards single approach findings and less confidence in the reliability of statistical test results produced under the pressure of reporting significant outcomes (among many others, Aguinis et al, 2017;Brodeur et al, 2016;Chordia et al, 2017;Christensen and Miguel, 2018;Harrison et al, 2017;Harvey et al, 2016;Ioannidis, 2005;Kim and Ji, 2015;Leamer, 1983;Morey and Yadav, 2018;Sterck, 2019;Wasserstein and Lazar, 2016). In his presidential address to the American Finance Association in 2017, Campbell Harvey criticized the misinterpretation of pvalues and the fact that empirical research is prone to publish articles with positive findings, which creates strong incentives for researchers to engage in data mining and p-hacking (Harvey, 2017).…”

World Economic Outlook, April 2020

“…The exercise is similar in spirit to that in Deutsche Bundesbank (2017) for euro area economies. 30 The share of explained deviations in unexpected debt changes from unexpected interest rate-growth differential (r − g) changes is about 50 percent, based on the economic importance measures in Sterck (2019). In principle, the unexpected changes in debt due to r − g and that due to the primary deficit-to-GDP ratio could be related.…”

Cash Transfers and Migration: Theory and Evidence from a Randomized Controlled Trial

“…More generally, our research contributes to the literature on the determinants of international migration, adding new empirical evidence on the relationship between income and migration. Researchers using macro-level data have identified a clear inverted U-shaped relationship between income and migration rates (Dao et al, 2018;Sterck, 2019). Micro-level evidence is, however, far less conclusive, and mostly focuses on middle-income countries (Clemens et al, 2014).…”