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.
Download (283Kb) | Preview
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)|
|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|
Actions (login required)
|Record administration - authorised staff only|