Study week on the econometric approach to development planning

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Monograph

Identifikator:: 876375174

URN:: urn:nbn:de:zbw-retromon-1989

Document type:: Monograph

Author:: Lilienthal, Johann

Title:: Fabrikorganisation, Fabrikbuchführung und Selbstkostenberechnung der Firma Ludw. Loewe & Co. Actiengesellschaft, Berlin

Place of publication:: Berlin

Publisher:: Verlag von Julius Springer

Year of publication:: 1907

Scope:: 1 Online-Ressource (XI, 220 Seiten)

Digitisation:: 2017

Collection:: Economics Books

Usage license:: Get license information via the feedback formular.

Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Die Geschäftsbuchführung.

Collection:: Economics Books

SEMAINE D'ÉTUDE SUR LE ROLE DE L’ANALYSE ECONOMETRIQUE ETC. 163 the two-stage method of least squares sets the trap of overfitting in a new disguise. The transformation (22a) tends to carry all parameters of the entire primary form into each relation of the reduced form (*7). Thus if there are some 3 or 4 para- meters in each behaviour relation of the primary form, and the primary form involves some 50 behaviour relations, each rela- tion of the reduced form will involve some 150 parameters, far more than the number of observations usually available. Well to note, I am not saying that the model builders walk straight into the pitfall of overfitting. On the contrary, from the begin- nings of the theory of ID-systems it has been a rule to specify each relation of the reduced form as involving all predeter- mined variables of the entire system, and the ensuing dangers of collinearities in the empirical parameter estimation have been recognized for a long time (*). The specific point I wish to make is that the risk of overfitting is tangible already with a modest number of variables in the reduced form, owing to autocorrelation and inertia effects in most or all variables of the system. Such overfitting will blur the distinction between an ID-system and the corresponding BEID-system, with risk that the resulting parameter estimates will be biased. To assess and evaluate the bias by an aprioristic analysis is extremely dif- ficult or — at least in practice — impossible, because it leads into overwhelming complexities even for forecasting systems of moderate size. The approach of a predictive test will how- ever reveal the overfitting, and thereby the test will also reveal the difference between the ID- and BEID-systems and the ensuing bias in the parameter estimation. (7) Explicit illustrations are given in Ref. 13, p. 484, and with mors detail in Ref. 27. (*) The difficulties at issue were amply emphasized by Professor D W JORGENSON in the oral presentation of his report. Ref. 48. to the Copenhagen meeting of Feonometric Society. Tulv 1062 ar old - pag. 40

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