Scottish Graduate School of Social Science Psychometrics/Economics Sessions

Developing the following for a three hour session at the SGSSS summer school in June. Comments welcome as we go:


Incorporating subjective and psychometric measures into economics: issues and applications

The use of subjective and psychometric scales is becoming increasingly common in economics and offers a key point of intersection between economics and psychology. Such measures can be used in many different designs, including studies that seek to explain an important variable measured by self-report (such as health or well-being) or studies that seek to use self-reported variables as explanatory variables. This course outlines a number of key features that need to be taken into account when using self-reported or subjective measures in economic applications. Firstly, we examine survey design and the principles for sound construction of survey measures. Secondly, we examine basic linear and non-linear econometric methods for the analysis of survey data. Thirdly, we examine the use of subjective measures as dependent variables in standard regression designs. In particular, we consider the problem of differential item functioning, namely what happens when respondents to survey questions use different criteria for judging what the question means (King et al 2004) . We consider the use of anchoring vignettes and hierarchical regression models to take into account these errors. Finally, we examine the incorporation of self-reported and subjective measures in economic studies as explanatory variables explaining outcomes such as health and education. A recent literature (e.g. Borghans, Heckman, Duckworth and ter Weel 2008) has examined how to integrate constructs from psychology into understanding economic outcomes. This literature is rapidly becoming one of the major areas in fields such as health economics and education economics. However, there are many issues with using variables such as personality in econometric functions. We examine new statistical designs for incorporating such measures.

Borghan, L., Duckworth, A., Heckman, J., Weel, B (2008). "The Economics and Psychology of Personality Traits," Journal of Human Resources, University of Wisconsin Press, vol. 43(4).

King, Gary, Christopher J. L. Murray, Joshua A. Salomon, and Ajay Tandon. "Enhancing the Validity and Cross-cultural Comparability of Measurement in Survey Research." American Political Science Review 98 (2004): 191-207