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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

    (Institute for Fiscal Studies)

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.

Suggested Citation

  • Le-Yu Chen & Jerzy Szroeter, 2012. "Testing multiple inequality hypotheses: a smoothed indicator approach," CeMMAP working papers CWP16/12, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:cemmap:16/12
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Markus Frölich & Martin Huber, 2014. "Direct and indirect treatment effects: causal chains and mediation analysis with instrumental variables," CeMMAP working papers CWP31/14, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    2. Martin Huber & Giovanni Mellace, 2014. "Testing exclusion restrictions and additive separability in sample selection models," Empirical Economics, Springer, vol. 47(1), pages 75-92, August.
    3. repec:eee:ecolet:v:159:y:2017:i:c:p:23-27 is not listed on IDEAS
    4. repec:bla:jorssa:v:180:y:2017:i:2:p:475-502 is not listed on IDEAS
    5. Castagnetti, Carolina & Rosti, Luisa & Töpfer, Marina, 2018. "Discriminate me - if you can! The disappearance of the gender pay gap among public-contest selected employees," Discussion Papers 103, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    6. Huber, Martin & Wüthrich, Kaspar, 2017. "Evaluating local average and quantile treatment effects under endogeneity based on instruments: a review," FSES Working Papers 479, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    7. Bolzern, Benjamin & Huber, Martin, 2017. "Testing the validity of the compulsory schooling law instrument," Economics Letters, Elsevier, vol. 159(C), pages 23-27.
    8. Fiorini, Mario & Katrien Stevens, 2014. "Assessing the Monotonicity Assumption in IV and fuzzy RD designs," Working Papers 2014-13, University of Sydney, School of Economics.

    More about this item

    Keywords

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

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics

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