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How to decompose the R²?: A comment on Henderson et al. (2018)

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  • Olivier Sterck

Abstract

Henderson et al. (2018) assessed the economic importance of 24 geographic variables in determining the worldwide spatial distribution of economic activity, as proxied by night lights. In this short piece, I first show that the method they used to measure the economic importance of effects – the Shapley value – is flawed, implying that some their results are misleading. Second, I use an axiomatic approach to build a new method for assessing the economic importance of effects, which corrects for the identified flaws. Finally, I revisit the conclusions of Henderson et al. (2018) in light of the new method.

Suggested Citation

  • Olivier Sterck, 2018. "How to decompose the R²?: A comment on Henderson et al. (2018)," CSAE Working Paper Series 2018-01, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:2018-01
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    More about this item

    Keywords

    Economic importance; Shapley values; Development; Physical geography; Agriculture;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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