How Much Does the Cardinal Treatment of Ordinal Variables Matter? – New Working Paper

Concepts such as subjective well-being, satisfaction, happiness, trust, measures of quality, and even standardized test scores are all measured using an ordinal variable. This means that we know the rank of the response categories (e.g. a respondent reporting being “very satisfied” indicates they are more satisfied than if they had reported being “satisfied”), but we do not know the interval between response categories (e.g. we don’t know how much more satisfied “very satisfied” is compared to “satisfied”). This is contrasted with cardinal variables, such as earnings, where we know $10 is more than $5 and represents twice as much money.

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