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How Much Should We Trust Regression-Kink-Design Estimates?
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Institute for Housing and Urban Research. Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2013 (Swedish)Report (Other academic)
Abstract [en]

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, 2013. , 69 p.
Series
Working paper / Department of Economics, Uppsala University (Online), ISSN 1653-6975 ; 2013:22
Keyword [en]
Regression Kink Design, Endogenous regressors, Intergovernmental grants, Flypaper effect
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:uu:diva-211572OAI: oai:DiVA.org:uu-211572DiVA: diva2:667602
Available from: 2013-11-27 Created: 2013-11-27 Last updated: 2013-11-27Bibliographically approved

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Ando, Michihito

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CiteExportLink to record
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  • apa
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