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With or Without U? The appropriate test for a U shaped relationship

Author

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  • Lind, Jo Thori

    (Dept. of Economics, University of Oslo)

  • Mehlum, Halvor

    (Dept. of Economics, University of Oslo)

Abstract

Non-linear relationships are common in economic theory, and such relationships are also frequently tested empirically. We argue that the usual test of non-linear relationships is flawed, and derive the appropriate test for a U shaped relationship. Our test gives the exact necessary and sufficient conditions for the test of a U shape in both finite samples and for a large class of models.

Suggested Citation

  • Lind, Jo Thori & Mehlum, Halvor, 2007. "With or Without U? The appropriate test for a U shaped relationship," Memorandum 21/2007, Oslo University, Department of Economics.
    • Handle: RePEc:hhs:osloec:2007_021
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    File URL: http://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2007/Memo-21-2007.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    U shape; hypothesis test; Kuznets curve; Fieller interval;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General

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