Cowell, Frank 
ORCID: 0000-0002-3778-2152, Flachaire, Emmanuel and Bandyopadhyay, Sanghamitra
(2009)
Goodness-of-fit: an economic approach.
Distributional Analysis Research Programme Papers (DARP 101).
The Toyota Centre, London School of Economics and Political Science, London, UK.
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Abstract
Specific functional forms are often used in economic models of distributions; goodness-of-fit measures are used to assess whether a functional form is appropriate in the light of real-world data. Standard approaches use a distance criterion based on the EDF, an aggregation of differences in observed and theoretical cumulative frequencies. However, an economic approach to the problem should involve a measure of the information loss from using a badly-fitting model. This would involve an aggregation of, for example, individual income discrepancies between model and data. We provide an axiomatisation of an approach and applications to illustrate its importance.
| Item Type: | Monograph (Discussion Paper) |
|---|---|
| Official URL: | http://sticerd.lse.ac.uk/_new/publications/series.... |
| Additional Information: | © 2009 the authors |
| Divisions: | Economics STICERD |
| Subjects: | H Social Sciences > HB Economic Theory |
| JEL classification: | C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C10 - General D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement |
| Date Deposited: | 07 Oct 2009 16:31 |
| Last Modified: | 11 Dec 2024 18:56 |
| URI: | http://eprints.lse.ac.uk/id/eprint/25433 |
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