Unhappy with Semi-Parametrics? A Replication Study of a Life-Satisfaction Analysis.

Functional form specification is an important issue in econometrics. While non-parametric techniques can partially solve this problem by relaxing the assumptions on any explicit functional form, it is at the cost of easy interpretation and also facing the curse of dimensionality. The semi-parametric techniques are introduced as a way of circumventing these shortcomings. However, the non-parametric part of the model is particularly sensitive to model assumptions in the parametric part. In the recent literature on life-satisfaction these methods have been used without taking sufficient care. It will be shown how this can easily, though not necessarily, lead to erroneous conclusions.