Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/123789
Authors: 
Ando, Michihito
Year of Publication: 
2013
Series/Report no.: 
Working Paper, Department of Economics, Uppsala University 2013:22
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.
Subjects: 
Regression Kink Design
Endogenous regressors
Intergovernmental grants
Flypaper effect
JEL: 
C13
C21
H71
H72
H77
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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