Improving econometric prediction by machine learning

We present a Machine Learning (ML) toolbox to predict targeted econometric outcomes improving prediction in two directions: (i) by cross-validatedoptimal tuning, (ii) by comparing/combining results from different learners (meta-learning). In predicting woman wage class based on her characteristics, we show that all our ML methods' predictions highly outperform standard multinomial logit ones, both in terms of mean accuracy and its standard deviation. In particular, we set out that a regularized multinomial regression obtains an average prediction accuracy almost 60% larger than that of an unregularized one. Finally, as different learners may behave differently, we show that combining them into one ensemble learner proves to preserve good predictive accuracy lowering the variance more than stand-alone approaches.