Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 2013:22: How Much Should We Trust Regression-Kink-Design Estimates?

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 PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Lovisa Isaksson ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2019-01-15 07:35:26.