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

  • Lind, Jo Thori

    ()

    (Dept. of Economics, University of Oslo)

  • Mehlum, Halvor

    ()

    (Dept. of Economics, University of Oslo)

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.

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File URL: http://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2007/Memo-21-2007.pdf
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Paper provided by Oslo University, Department of Economics in its series Memorandum with number 21/2007.

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Length: 14 pages
Date of creation: 01 Sep 2007
Date of revision:
Handle: RePEc:hhs:osloec:2007_021
Contact details of provider: Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.html
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  1. Kalemli-Ozcan, S. & Sorensen, B.E. & Yosha, O., 1999. "Risk Sharing and Industrial Specialization: Regional and International Evidence," Papers 16-99, Tel Aviv.
  2. Philippe Aghion & Nicholas Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2002. "Competition and innovation: an inverted U relationship," IFS Working Papers W02/04, Institute for Fiscal Studies.
  3. Chambers, Dustin, 2007. "Trading places: Does past growth impact inequality?," Journal of Development Economics, Elsevier, vol. 82(1), pages 257-266, January.
  4. Imbs, Jean & Wacziarg, Romain, 2000. "Stages of Diversification," CEPR Discussion Papers 2642, C.E.P.R. Discussion Papers.
  5. Philippe Aghion & Rachel Griffith & Peter Howitt, 2006. "Vertical Integration and Competition," American Economic Review, American Economic Association, vol. 96(2), pages 97-102, May.
  6. David L. Carr & James R. Markusen & Keith E. Maskus, 2001. "Estimating the Knowledge-Capital Model of the Multinational Enterprise," American Economic Review, American Economic Association, vol. 91(3), pages 693-708, June.
  7. Grossman, Gene M & Krueger, Alan B, 1995. "Economic Growth and the Environment," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 353-77, May.
  8. Selden Thomas M. & Song Daqing, 1994. "Environmental Quality and Development: Is There a Kuznets Curve for Air Pollution Emissions?," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 147-162, September.
  9. Terra G. Mckinnish, 2004. "Occupation, Sex-Integration, and Divorce," American Economic Review, American Economic Association, vol. 94(2), pages 322-325, May.
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