How Much Should We Trust Regression-Kink-Design Estimates?
2013 (English)Report (Other academic)
In a Regression Kink (RK) design with a finite sample, a confounding smooth nonlinear relationship between an assignment variable and an outcome variable around a threshold can be spuriously picked up as a kink and result in a biased estimate. In order to investigate how well RK designs handle such confounding nonlinearity, I firstly implement Monte Carlo simulations and then study the effect of fiscal equalization grants on local expenditure using a RK design. Results suggest that RK estimation with a confounding nonlinearity often suffers from bias or imprecision and estimates are credible only when relevant covariates are controlled for.
Place, publisher, year, edition, pages
Uppsala: Department of Economics, Uppsala University , 2013. , 19 p.
Working paper / Uppsala Center for Fiscal Studies, Uppsala University, 2013:15
Regression Kink Design, Endogenous regressors, Intergovernmental grants, Flypaper effect
Research subject Economics
IdentifiersURN: urn:nbn:se:uu:diva-210986OAI: oai:DiVA.org:uu-210986DiVA: diva2:664965