Oxford Bulletin of Economics and Statistics· 2019Q1
Elasticities and the Inverse Hyperbolic Sine Transformation
- 1,115citations
- Q1SCImago
- 2019year
Short summary
Applied econometricians can now derive precise elasticities when using the inverse hyperbolic sine (arcsinh) transformation, a common practice that allows retaining zero-valued observations.
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Key points
- Provides derivations for elasticities using the inverse hyperbolic sine (arcsinh) transformation.
- Shows that ad hoc transformations can lead to significant differences in elasticity estimates.
- Offers practical guidance for applied econometricians.
- Addresses the common issue of retaining zero-valued observations in models.
AI-generated from the title and abstract; the full text is not read.
Abstract
Abstract Applied econometricians frequently apply the inverse hyperbolic sine (or arcsinh) transformation to a variable because it approximates the natural logarithm of that variable and allows retaining zero‐valued observations. We provide derivations of elasticities in common applications of the inverse hyperbolic sine transformation and show empirically that the difference in elasticities driven by ad hoc transformations can be substantial. We conclude by offering practical guidance for applied researchers.
The authors' abstract, as published at the source. Oxford Bulletin of Economics and Statistics, 2019 · DOI ↗
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Field: Applied Mathematics
Applied MathematicsMathematics