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Concept
Stylized fact
Summary
In social sciences, especially economics, a stylized fact is a simplified presentation of an empirical finding. Stylized facts are broad tendencies that aim to summarize the data, offering essential truths while ignoring individual details.
A prominent example of a stylized fact is: "Education significantly raises lifetime income." Another stylized fact in economics is: "In advanced economies, real GDP growth fluctuates in a recurrent but irregular fashion".
However, scrutiny to detail will often produce counterexamples. In the case given above, holding a PhD may lower lifetime income, because of the years of lost earnings it implies and because many PhD holders enter academia instead of higher-paid fields. Nonetheless, broadly speaking, people with more education tend to earn more, so the above example is true in the sense of a stylized fact.
When describing what is generally regarded as the first econometric macro model ever developed, Jan Tinbergen (1936) introduces the concept of stylization as follows: "To get a clear view, stylisation is indispensable. The many phenomena must be grouped in such a way that the picture becomes clear, yet without losing its characteristic traits. Of course every stylisation is a hazardous venture. The art of the social economist's work lies in this stylisation. Some stylisations have been unwieldy, others have been unrealistic. But stylisation is essential. The alternative is barrenness."
The term "stylised facts" was introduced by the economist Nicholas Kaldor in the context of a debate on economic growth theory in 1961, expanding on model assumptions made in a 1957 paper.
Criticizing the neoclassical models of economic growth of his time, Kaldor argues that theory construction should begin with a summary of the relevant facts. However, to handle the problem that "facts as recorded by statisticians, are always subject to numerous snags and qualifications, and for that reason are incapable of being summarized",
he suggests that theorists “should be free to start off with a stylised view of the facts – i.
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