Question

(g) Do a web search and find another example of Simpson's Paradox, preferably in a business context. Don't pick the first one you find - dig a little deeper.

Give the details of the example and explain how it demonstrates this paradox.

Include the url to the website.

Answer 1

Since 2000, the median US wage has risen about 1%, adjusted for inflation.

But over the same period, the median wage for:
high school dropouts,
high school graduates with no college education,
people with some college education, and
people with Bachelor’s or higher degrees
have all decreased.

In other words, within every educational subgroup, the median wage is lower now than it was in 2000.

This is an example of Simpson's Paradox. As wikipedia, explains it Simpson's Paradox simply states that a trend appears in several different groups of data but disappears or reverses when these groups are combined.

In this case we see that mean wage for each group is decreases. But when they are combined they show a rise of about 1%.Hence this very well illustrates the Simpson's Paradox.

However the author of the article attributes this paradox to the change in the profile of the workforce over the year. According to him, the group of educated college graduates getting high paying jobs nullifies the effect of the fall in the wages of the low educated persons. Hence an overall rise in the wages is since.

Website reference - blog.revolutionanalytics.com/2013/07/a-great-example-of-simpsons-paradox.html