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Regression Kink Design: Theory and Practice

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  • David Card
  • David S. Lee
  • Zhuan Pei
  • Andrea Weber

Abstract

A regression kink design (RKD or RK design) can be used to identify casual effects in settings where the regressor of interest is a kinked function of an assignment variable. In this paper, we apply an RKD approach to study the effect of unemployment benefits on the duration of joblessness in Austria, and discuss implementation issues that may arise in similar settings, including the use of bandwidth selection algorithms and bias-correction procedures. Although recent developments in nonparametric estimation (e.g. Imbens et al. (2012) and Calonico et al. (2014)) are sometimes interpreted by practitioners as pointing to a default estimation procedure, we show that in any given application different procedures may perform better or worse. In particular, Monte Carlo simulations based on data generating processes that closely resemble the data from our application show that some asymptotically dominant procedures may actually perform worse than “sub-optimal” alternatives in a given empirical application.

Suggested Citation

  • David Card & David S. Lee & Zhuan Pei & Andrea Weber, 2016. "Regression Kink Design: Theory and Practice," NBER Working Papers 22781, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:22781
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    1. David Card & Andrew Johnston & Pauline Leung & Alexandre Mas & Zhuan Pei, 2015. "The Effect of Unemployment Benefits on the Duration of Unemployment Insurance Receipt: New Evidence from a Regression Kink Design in Missouri, 2003-2013," American Economic Review, American Economic Association, vol. 105(5), pages 126-130, May.
    2. David Card & Raj Chetty & Andrea Weber, 2007. "Cash-on-Hand and Competing Models of Intertemporal Behavior: New Evidence from the Labor Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(4), pages 1511-1560.
    3. Michihito Ando, 2017. "How much should we trust regression-kink-design estimates?," Empirical Economics, Springer, vol. 53(3), pages 1287-1322, November.
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    5. David Card & David S. Lee & Zhuan Pei, 2009. "Quasi-Experimental Identification and Estimation in the Regression Kink Design," Working Papers 1206, Princeton University, Department of Economics, Industrial Relations Section..
    6. Emilia Del Bono & Andrea Weber, 2008. "Do Wages Compensate for Anticipated Working Time Restrictions? Evidence from Seasonal Employment in Austria," Journal of Labor Economics, University of Chicago Press, vol. 26(1), pages 181-221.
    7. Ganong, Peter & Jäger, Simon, 2014. "A Permutation Test and Estimation Alternatives for the Regression Kink Design," IZA Discussion Papers 8282, Institute of Labor Economics (IZA).
    8. David Card & David S. Lee & Zhuan Pei, 2009. "Quasi-Experimental Identification and Estimation in the Regression Kink Design," Working Papers 1206, Princeton University, Department of Economics, Industrial Relations Section..
    9. Johannes F. Schmieder & Till von Wachter & Stefan Bender, 2012. "The Effects of Extended Unemployment Insurance Over the Business Cycle: Evidence from Regression Discontinuity Estimates Over 20 Years," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(2), pages 701-752.
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    More about this item

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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