Copulas explained

Let’s say you want to measure the relationship between multiple variables. One of the easiest ways to do this is with a linear regression (e.g., ordinary least squares). However, this methodology assumes that the relationship between all variables is linear. One could also use generalized linear models (GLM) in which variables are transformed, but again…

People are more generous than you may think

The paradigm of homo economicus–a perfectly rational, self-interested person–may have taken a hit based on the findings of a paper by Dwyer et al. (2023). The authors aim to examine how people spend windfall earnings using a randomized experiment. We took advantage of a rare opportunity to examine generosity among a diverse sample of adults…

Public-Private Partnerships in Health

A paper by Fabre and Straub (2023) examines how public-private partnerships (PPP) have worked in practice. Why would linking public and private provisions of goods and services be useful? One reason is that the public sector might have policy goals (e.g., providing health care to the poor), which the private sector may not provide in…

What type of model should I use?

The answer depends on a number of factors. These include: (i) are there interactions between the entity and the environment, (ii) does the model have a time component, (iii) is the model a cohort or individual level model, (iv) is the model continuous or discrete states, and (v) is it Markovian or not. The Brennan…

What is certain about uncertainty?

That is the title of an article by Cascaldi-Garcia et al. (2023) in the Journal of Economic Literature. I summarize some of the key findings below. Definitions: Risk: Applies to situations in which the outcome is unknown to decision makers, but the probability distribution governing the outcome is known” Volatility. Often used synonymously with risk,…

American Economic Journal: Best Paper Awards

The American Economic Journal (AEJ) recently came out with its awards for best papers of the year. These are listed below along with their abstracts. AEJ: Applied Economics: “The Evolution of Work in the United States,” by Enghin Atalay, Phai Phongthiengtham, Sebastian Sotelo, and Daniel Tannenbaum 12(2), (pp. 1-34) April 2020 AEJ: Economic Policy: “Technology,…

Model Fit as a Principal-Agent problem

Let’s say that you want to predict the impact of some policy intervention. Let us also assume that there is a randomized controlled trial (RCT) examining the impact of said policy on some outcome of interest. To predict the best model fit, at first glance, one would use all the data in the RCT to…