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More On “Compositional Effects”


I’ll admit this is a little more of a “dry” post…

…but after looking at some info on the Australian Bureau of Statistics (ABS) website, I noticed the following in a section on “Average Weekly Earnings, Australia, Aug 2011“, relating to “Compositional Effects”:

COMPOSITIONAL EFFECTS

Movements in average weekly earnings can be affected by changes in both the level of earnings per employee and in the composition of the labour force. Refer to paragraphs 25 and 26 of the Explanatory Notes.

It is good to see that the premier statistical body in our fine land also sees it as important to remind us that point-value metrics – such as average this, and median that – can change, not only because of actual shifts in per-unit values, but also because the shape of the distribution of the data concerned shifts to one side or the other.

This was in relation to Incomes, and Income distributions, but it also applies necessarily to Vendor and Sale Prices, just as readily, and this should be taken into account when considering the values and trends of point-value metrics – ie. the average, medians, modes, etc, that are stipulated and trended without prior illustration (ie. charting, often via a Frequency Histogram or similar) of the distributions from which those point-value metrics were obtained.

However, sadly, I have seen very, very few instances where data is released first showing the distribution – let alone time-trends of distributions! – before reporting the point-value metric (average, median, etc); the only example I can remember is the occasional ABS release where a distribution was shown for incomes for a particular period – fantastic!

But it is a sad state of affairs that we do not have it as a standard practice – and we make so much of so little when we consider these sorts of economic data when only point-value metrics are provided, without the distributions that actually give them their context and meaning.

I look forward to the day when this becomes standard practice.

Regards,

Stewart

http://www.processolutions.com.au

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