Michihito Ando ()
Additional contact information
Michihito Ando: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Abstract: In a Regression Kink (RK) design with a finite sample, a confounding smooth nonlinear relationship between an assignment variable and an outcome variable around a threshold can be spuriously picked up as a kink and result in a biased estimate. In order to investigate how well RK designs handle such confounding nonlinearity, I firstly implement Monte Carlo simulations and then study the effect of fiscal equalization grants on local expenditure using a RK design. Results suggest that RK estimation with a confounding nonlinearity often suffers from bias or imprecision and estimates are credible only when relevant covariates are controlled for.
Keywords: Regression Kink Design; Endogenous regressors; Intergovernmental grants; Flypaper effect
JEL-codes: C13; C21; H71; H72; H77
69 pages, November 11, 2013
Full text files
FULLTEXT01.pdf
Questions (including download problems) about the papers in this series should be directed to Ulrika Ă–jdeby ()
Report other problems with accessing this service to Sune Karlsson ().
RePEc:hhs:uunewp:2013_022This page generated on 2024-09-13 22:17:38.