Elasticities and the Inverse Hyperbolic Sine Transformation

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Authors Marc F. Bellemare, Casey J. Wichman
Journal/Conference Name Oxford Bulletin of Economics and Statistics
Paper Category
Paper Abstract Applied econometricians frequently apply the inverse hyperbolic sine (or arcsinh) transformation to a variable because it approximates the natural logarithm of that variable and allows retaining zero‚Äźvalued observations. We provide derivations of elasticities in common applications of the inverse hyperbolic sine transformation and show empirically that the difference in elasticities driven by ad hoc transformations can be substantial. We conclude by offering practical guidance for applied researchers.
Date of publication 2020
Code Programming Language Stata

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