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How Much Should We Trust Regression-Kink-Design Estimates?
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics, Uppsala Center for Fiscal Studies.
2013 (English)Report (Other academic)
Abstract [en]

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.

Place, publisher, year, edition, pages
Uppsala: Department of Economics, Uppsala University , 2013. , 19 p.
Working paper / Uppsala Center for Fiscal Studies, Uppsala University, 2013:15
Keyword [en]
Regression Kink Design, Endogenous regressors, Intergovernmental grants, Flypaper effect
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Research subject
URN: urn:nbn:se:uu:diva-210986OAI: diva2:664965
Available from: 2013-11-18 Created: 2013-11-18 Last updated: 2013-11-22Bibliographically approved

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UCFS_201315_2_corrected(756 kB)176 downloads
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Ando, Michihito
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Uppsala Center for Fiscal Studies

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