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Testing multiple inequality hypotheses: a smoothed indicator approach

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  • Le-Yu Chen

    (Institute for Fiscal Studies and Academia Sinica)

  • Jerzy Szroeter

Abstract

This paper proposes a class of origin-smooth approximators of indicators underlying the sum-of-negative-part statistic for testing multiple inequalities. The need for simulation or bootstrap to obtain test critical values is thereby obviated. A simple procedure is enabled using fixed critical values. The test is shown to have correct asymptotic size in the uniform sense that supremum finite-sample rejection probability over null-restricted data distributions tends asymptotically to nominal significance level. This applies under weak assumptions allowing for estimator covariance singularity. The test is unbiased for a wide class of local alternatives. A new theorem establishes directions in which the test is locally most powerful. The proposed procedure is compared with predominant existing tests in structure, theory and simulation. This paper is a revised version of CWP13/09.

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Bibliographic Info

Paper provided by Centre for Microdata Methods and Practice, Institute for Fiscal Studies in its series CeMMAP working papers with number CWP16/12.

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Date of creation: Jul 2012
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Handle: RePEc:ifs:cemmap:16/12

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Related research

Keywords: Test; Multiple inequalities; One-sided hypothesis; Composite null; Binding constraints; Asymptotic exactness; Covariance singularity; Indicator smoothing;

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Cited by:
  1. Frölich, Markus & Huber, Martin, 2014. "Direct and Indirect Treatment Effects: Causal Chains and Mediation Analysis with Instrumental Variables," IZA Discussion Papers 8280, Institute for the Study of Labor (IZA).

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