Cowell, Frank, 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 |
| Library of Congress subject classification: | H Social Sciences > HB Economic Theory |
| Journal of Economic Literature Classification System: | 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 |
| Sets: | Collections > Economists Online Departments > Economics Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD) |
| Identification Number: | DARP 101 |
| Date Deposited: | 07 Oct 2009 16:31 |
| URL: | http://eprints.lse.ac.uk/25433/ |
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