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Testing for Bivariate Stochastic Dominance Using Inequality Restrictions

Author

Listed:
  • Thanasis Stengos

    (University of Guelph)

  • Brennan S. Thompson

    (Ryerson University)

Abstract

In this paper, we propose of a test of bivariate stochastic dominance using a generalized framework for testing inequality constraints. Unlike existing tests, this test has the advantage of utilizing the covariance structure of the estimates of the joint distribution functions. The performance of our proposed test is examined by way of a Monte Carlo experiment. We also consider an empirical example which utilizes household survey data on income and health status.

Suggested Citation

  • Thanasis Stengos & Brennan S. Thompson, 2011. "Testing for Bivariate Stochastic Dominance Using Inequality Restrictions," Working Papers 1107, University of Guelph, Department of Economics and Finance.
    • Handle: RePEc:gue:guelph:2011-07.
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    Cited by:

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    2. Tahsin Mehdi, 2020. "Testing for Stochastic Dominance up to a Common Relative Poverty Line," Econometrics, MDPI, vol. 8(1), pages 1-9, February.
    3. Khaled, Mohamad A. & Makdissi, Paul & Yazbeck, Myra, 2018. "Income-related health transfers principles and orderings of joint distributions of income and health," Journal of Health Economics, Elsevier, vol. 57(C), pages 315-331.

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    Keywords

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    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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