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The Cult of Statistical Significance – What Economists Should and Should Not Do to Make their Data Talk

Krämer, Walter

Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 131 (2011), Iss. 3: pp. 455–468

20 Citations (CrossRef)

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Walter Krämer, TU Dortmund, Fakultät Statistik, 44221 Dortmund.

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Abstract

This article takes issue with a rather devastating critique of statistical significance testing propagated in a recent book by Ziliak/McCloskey (2008) of the same title. Ziliak/McCloskey argue that statistical significance testing is a barrier rather than a booster for empirical research in economics and should therefore be abandoned altogether. The present article argues that this is good advice in some research areas but not in others, with the aim of making practitioners aware of various fallacies connected with the concept of statistical significance, and at the same time showing where significance testing is most fruitfully employed. Taking all issues which have appeared so far of the German Economic Review and a recent epidemiological meta-analysis as examples, the present paper shows that there has indeed been a lot of misleading work where confirmatory significance testing has played a major role, and that at the same time many promising avenues, best summarized under the heading “specification tests”, have not been used.

Zusammenfassung

Der Beitrag kritisiert die in jüngster Zeit vermehrt geäußerte Kritik an statistischen Signifikanztests aller Art, speziell in den Wirtschaftswissenschaften. Hier wird in der Tat mit konfirmatorischen Tests, wo eine Ablehnung der Nullhypothese als Bestätigung einer vorab formulierten Theorie gewertet wird, viel Unfug betrieben. Dies wird an zahlreichen Beispielen aufgezeigt. Auf der anderen Seite existiert aber ein enormes, noch nicht ausgeschöpftes Potential an Spezifikationstests, die eine etablierte Theorie einer Prüfung durch die Daten unterwerfen. Hier können statistische Signifikanztests für den Fortschritt in der Forschung durchaus nützlich sein.

JEL Classifications: B40, C12, C52