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Should we care about the uncertainty around measures of political-economic development?

Desbordes, Rodolphe and Koop, Gary (2015) Should we care about the uncertainty around measures of political-economic development? Journal of Comparative Economics. ISSN 0147-5967

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Abstract

Several proxies of political-economic development, such as the Worldwide Governance Indicators, come in the form of an estimate along with a standard error reflecting the uncertainty of this estimate. Existing empirical work discards the information provided by the standard errors. We argue that the appropriate practice should be to take into account this additional information through the use of multiple imputation. We investigate the importance of our proposed approach in several applications. We find that accounting for the uncertainty around the values of various measures of political-economic development tends to have a large influence on the magnitude and statistical significance of the estimated effects of these variables.