Gini's Mean Difference Offers a Response to Leamer's Critique

Abstract

Gini's mean difference has decomposition properties that nest the decomposition of the variance as a special case. By using it one may reveal the implicit assumptions imposed on the data by using the variance. I argue that some of those implicit assumptions can be traced to be the causes of Leamer's critique. By requiring the econometrician to report whether those assumptions are violated by the data, we may be able to offer a response to Leamer's critique. This will reduce the possibility of supplying "empirical proofs" which in turn may increase the trust in econometric research.

Keywords: Gini, variance, regression

JEL Classification: c10