Research from the Vancouver School of Economics is consistently published in the top academic journals in the world. This page lists the peer-reviewed publications by our faculty that appeared in print between May 2012 and April 2013.
Relative to developed countries, there are far fewer women than men in India. Estimates suggest that among the stock of women who could potentially be alive today, over 25 million are "missing". Sex selection at birth and the mistreatment of young girls are widely regarded as key explanations. We provide a decomposition of missing women by age across the states. While we do not dispute the existence of severe gender bias at young ages, our computations yield some striking findings. First, the vast majority of missing women in India are of adult age. Second, there is significant variation in the distribution of missing women by age across different states. Missing girls at birth are most pervasive in some north-western states, but excess female mortality at older ages is relatively low. In contrast, some north-eastern states have the highest excess female mortality in adulthood but the lowest number of missing women at birth. The state-wise variation in the distribution of missing women across the age groups makes it very difficult to draw simple conclusions to explain the missing women phenomenon in India.
[link to paper unavailable]
Does switching the composition of jobs between low-paying and high-paying industries have important effects on wages in other sectors? In this paper, we build on search and bargaining theory to clarify a key general equilibrium channel through which changes in industrial composition could have substantial effects on wages in all sectors. In this class of models, wage determination takes the form of a social interaction problem and we illustrate how the implied sectoral linkages can be empirically explored using U.S. Census data. We find that sector-level wages interact as implied by the model and that the predicted general equilibrium effects are present and substantial. We interpret our results as highlighting the relevance of search and bargaining theory for understanding the determination of wages, and we argue that the results provide support for the view that industrial composition is important for understanding wage outcomes.
We employ a novel data set to estimate a structural econometric model of the decisions under risk of players in a game show where lotteries present payoffs in excess of half a million dollars. Differently from previous studies in the literature, the decisions under risk of the players in presence of large payoffs allow to estimate the parameters of the curvature of the vN-M utility function not only locally but also globally. Our estimates of relative risk aversion indicate that a constant relative risk aversion parameter of about one captures the average of the sample population. In addition we find that individuals are practically risk neutral at small stakes and risk averse at large stakes, a necessary condition, according to Rabin (2000) calibration theorem, for expected utility to provide a unified account of individuals’ attitude towards risk. Finally, we show that for lotteries characterized by substantial stakes non-expected utility theories fit the data equally well as expected utility theory.
Is skill dispersion a source of comparative advantage? In this paper we use microdata from the International Adult Literacy Survey to show that the effect of skill dispersion on trade flows is quantitatively similar to that of the aggregate endowment of human capital. In particular we investigate, and find support for, the hypothesis that countries with a more dispersed skill distribution specialize in industries characterized by lower complementarity of workers’ skills. The result is robust to the introduction of controls for alternative sources of comparative advantage, as well as to alternative measures of industry-level skill complementarity.
This paper develops and empirically examines a model of relative productivity differences both within and across industries for small open economies. We decompose the e ffect of industry productivity on export performance into direct e ffect of own firm productivity and an indirect eff ect of higher peer firm productivity. In a sample of Chilean and Colombian plants, we find evidence of both a positive direct e ffect and a negative indirect eff ect. The empirical evidence supports our theoretical prediction that industry-specifi c factors of production and asymmetric substitutability between domestic and foreign varieties drive the negative indirect e ffect.
This paper employs a novel data set on lobbying expenditures to measure the degree of within-sector political organization and to explore the determinants of the mode of lobbying and political organization across U.S. industries. The data show that sectors characterized by a higher degree of competition tend to lobby more together (through a sector-wide trade association), while sectors with higher concentration and more differentiated products lobby more individually. The paper proposes a theoretical model to interpret the empirical evidence. In an oligopolistic market, firms can benefit from an increase in their product-specific protection measure, if they can raise prices and profits. They find it less profitable to do so in a competitive market where attempts to raise prices are more likely to reduce profits. In competitive markets firms are therefore more likely to lobby together, thereby simultaneously raising tariffs on all products in the sector.
This paper develops a new argument for an export subsidy in the context of Mode 2 services trade (consumption abroad). Tourists consume a bundle of goods and services. Their choice of destination depends on the overall cost of this bundle. Using a monopolistic competition framework, a pricing externality is identified—firms do not internalize the effects of their pricing decision on the overall inflow of tourists. The paper develops conditions under which an export subsidy is optimal. It also serves to illustrate how trade policy in the context of service trade may differ from that targeting goods trade.
We study a newly created panel data set of relative prices for a large number of consumer goods among 31 European countries over a 15‐year period. The data set includes eurozone members both before and after the inception of the euro, floating exchange rate countries of Western Europe, and emerging market economies of Eastern and Southern Europe. We find that there is a substantial and continuing deviation from purchasing power parity (PPP) at all levels of aggregation, both for traded and non‐traded goods, even among eurozone members. Real exchange rates (RER) exhibit two clear properties in the sample (a) they are closely tied to gross domestic product (GDP) per capita relative to the European average, at all levels of aggregation and for both cross country time series variation; (b) they are highly positively correlated with variation in the relative price of non‐traded goods. We then construct a simple two‐sector endowment economy model of real exchange rate determination which exhibits these two properties, calibrated to match the data. Simulating the model using the historical relative GDP per capita for each country, we find that for most countries, there is a close fit between the actual and simulated real exchange rate. In terms of policy relevance, the model can offer suggestions of the degree to which real exchange rates in Europe (both in and out of the eurozone) have been overvalued (by approximately 15% in Greece and Portugal and 6% in Italy and Spain).
Historically, the world economy has been dominated by a single currency accepted in the exchange of goods and assets among countries. In recent decades, the U.S. dollar has played this role. The dollar acts as a “vehicle currency” in the sense that agents in nondollar economies will generally engage in currency trade indirectly using the U.S. dollar instead of using direct bilateral trade among their own currencies. A vehicle currency is desirable when there are transactions costs of exchange. This article constructs a dynamic general equilibrium model of a vehicle currency. We explore the nature of the efficiency gains arising from a vehicle currency and show how it depends on the total number of currencies in existence, the size of the vehicle currency economy, and the monetary policy followed by the vehicle currency’s government. We find that there can be significant welfare gains to a vehicle currency in a system of many independent currencies. But these gains are asymmetrically weighted toward the residents of the vehicle currency country. The survival of a vehicle currency places natural limits on the monetary policy of the vehicle currency country.
This paper documents some previously neglected features of sectoral shares at business cycle frequencies in OECD economies. In particular, we find that the nontraded sector share of output is as volatile as aggregate GDP, and that for most countries, the nontraded sector is distinctly countercyclical. While the standard international real business cycle model has difficulty in accounting for these properties of the data, an extended model which allows for sectoral adjustment along both the intensive and extensive margins does a much better job in replicating the volatilities and co-movements in the data. In addition, the model provides a closer match between theory and data with respect to the correlation between relative consumption growth and real exchange rate changes, a key measure of international risk-sharing.
Using new data from Statistics Canada, this article shows that the multifactor productivity (MFP) performance of the Canadian business sector has been reasonably satisfactory over the past half century. In particular, traditional gross income MFP growth averaged 1.03 per cent per year over the 1961-2011 period. This compares with the official Statistics Canada estimate of 0.28 per cent. The difference was mostly due to significantly higher capital input growth recorded by Statistics Canada. The study finds that quality adjusted labour input growth was the main driver of real income growth, followed by MFP growth, capital input growth, and finally by falling real import prices. The study encountered many data problems which should be addressed in future work on Canadian business sector productivity performance.
This rejoinder responds to the comments of Wulong Gu (2012) on the article by Diewert and Yu (2012). The paper lays out the algebra behind the Diewert-Yu capital services methodology and the corresponding methodology used by the Statistics Canada Canadian Productivity Program. The large differences in the estimates can mainly be explained by different treatments of the expected capital gains term in user costs and the use of sectoral balancing rates of return versus economy-wide balancing rates of return.
In many sectors of the economy, governments either provide various services at no cost or at highly subsidized prices. Examples are the health, education and general government sectors. The System of National Accounts 1993 recommends valuing these nonmarket outputs at their costs of production but it does not give much guidance on exactly how to do this. In this paper, an explicit methodology is developed that enables one to construct these marginal cost prices. However, in the main text, an activity analysis approach is taken in order to simplify the analysis, so in particular, constant returns to scale, no substitution production functions for the specific activities in the nonmarket sector are assumed. It is shown that it is possible to obtain meaningful measures of Total Factor Productivity growth in this framework. An “Appendix” relaxes some of the restrictive assumptions that are used in the main text.
The first part of the article reviews the methodology developed by Sydney Afriat for determining whether a finite set of price and quantity data are consistent with utility maximising behaviour by a consumer. Some extensions of his basic model to models of consumer behaviour where the structure of preferences is restricted in some way are also explained. Examples of special structures are homotheticity, separability and quasi‐linearity of the utility function. The second half of the article is devoted to developing Afriat‐type consistency tests for expected and non‐expected utility maximising behaviour.
We argue that women may be disinclined to participate in market work in the rural areas of India because of family status concerns in a culture that stigmatizes market work by married women. We set out a theoretical framework that offers predictions regarding the effects of caste-based status concerns on the time allocation of women. We then use the all-India National Sample Survey data for the year 2004–5 and the Time Use Survey for six states of India for the year 1998–99 to empirically test these hypotheses. After controlling for a host of correlates, we find that the ratio of women’s market work to men’s declines as we move up the caste hierarchy. This ratio falls as family wealth rises, and the decline is steeper for the higher castes. Finally, the effect on women’s market work of higher education is weaker for the higher castes. These findings lend support to our theory and to the view that, through its emphasis on family status, caste plays a pivotal role in undermining the autonomy of women. Our article has implications for how culture impinges on the rate at which poverty in developing countries can be reduced.
Considerable concern has recently been expressed about growing income inequality. Much of the discussion, though, has been in general terms and focused on the U.S. experience. To understand whether and how Canada ought to respond to this development, we need to be clear on the facts. This paper documents Canadian patterns in income inequality and investigates the top 1% of earners – the group receiving much attention. We summarize what is known about the causes of growing income inequality, including the role of gender wage differences. Finally we outline policy options for reducing -- or slowing the growth of -- inequality.
Tight labour markets driven by resource booms could increase the opportunity cost of schooling and crowd out human capital formation. For oil producing economies like the Province of Alberta, the OPEC oil shocks of 1973 to 1981 may have had an adverse long term effect on the productivity of the labor force if the oil boom resulted in workers reducing their ultimate investment in human capital rather than merely altering the timing of schooling. We analyze the effect of this decade long oil-boom on the long-term human capital investments and productivity for Alberta birth cohorts that were of normal schooling ages before, during and after the oil boom. Our findings suggest that resource booms may change the timing of schooling but they do not reduce the total accumulation of human capital.
[link to paper not available]
A political candidate chooses both the target and the informativeness of his campaign to signal his type, which consists of private information about himself and about his rival. A more informative positive (negative) campaign generates a more accurate public signal about his (the rival's) qualifications, but is more costly. In the unique least cost separating equilibrium of a two-type model, the high type separates by choosing the kind of campaign in which he has a comparative advantage over the low type. The comparative advantage in positive (negative) campaigns is stronger if the high type has favorable (unfavorable) information about his own qualifications and unfavorable (favorable) information about his rival. Additional ex post public information about the candidate (his rival) strengthens (weakens) the comparative advantage in positive (negative) campaigns. Allowing both positive and negative campaigns does not help the high type to separate if the campaign cost is concave in the informativeness, while allowing information campaigns by both candidates does.
Costly delay in negotiations can induce the negotiating parties to be more forthcoming with their information and improve the quality of the collective decision. Imposing a deadline may result in stalling, in which players at some point stop making concessions but switch back to conceding at the end, or a deadlock, in which concessions end permanently. Extending the deadline hurts the players in the first case, but is beneficial in the second. When the initial conflict between the negotiating parties is intermediate, the optimal deadline is positive and finite, and is characterized by the shortest time that allows efficient information aggregation in equilibrium.
To test whether the pride expression is an implicit, reliably developing signal of high social status in humans, the authors conducted a series of experiments that measured implicit and explicit cognitive associations between pride displays and high-status concepts in two culturally disparate populations--North American undergraduates and Fijian villagers living in a traditional, small-scale society. In both groups, pride displays produced strong implicit associations with high status, despite Fijian social norms discouraging overt displays of pride. Also in both groups, implicit and explicit associations between emotion expressions and status were dissociated; despite the cross-cultural implicit association between pride displays and high status, happy displays were, cross-culturally, the more powerful status indicator at an explicit level, and among Fijians, happy and pride displays were equally strongly implicitly associated with status. Finally, a cultural difference emerged: Fijians viewed happy displays as more deserving of high status than did North Americans, both implicitly and explicitly. Together, these findings suggest that the display and recognition of pride may be part of a suite of adaptations for negotiating status relationships, but that the high-status message of pride is largely communicated through implicit cognitive processes.
The pursuit of social rank is a recurrent and pervasive challenge faced by individuals in all human societies. Yet, the precise means through which individuals compete for social standing remains unclear. In 2 studies, we investigated the impact of 2 fundamental strategies—Dominance (the use of force and intimidation to induce fear) and Prestige (the sharing of expertise or know-how to gain respect)—on the attainment of social rank, which we conceptualized as the acquisition of (a) perceived influence over others (Study 1), (b) actual influence over others' behaviors (Study 1), and (c) others' visual attention (Study 2). Study 1 examined the process of hierarchy formation among a group of previously unacquainted individuals, who provided round-robin judgments of each other after completing a group task. Results indicated that the adoption of either a Dominance or Prestige strategy promoted perceptions of greater influence, by both group members and outside observers, and higher levels of actual influence, based on a behavioral measure. These effects were not driven by popularity; in fact, those who adopted a Prestige strategy were viewed as likable, whereas those who adopted a Dominance strategy were not well liked. In Study 2, participants viewed brief video clips of group interactions from Study 1 while their gaze was monitored with an eye tracker. Dominant and Prestigious targets each received greater visual attention than targets low on either dimension. Together, these findings demonstrate that Dominance and Prestige are distinct yet viable strategies for ascending the social hierarchy, consistent with evolutionary theory. (PsycINFO Database Record (c) 2013 APA, all rights reserved)
Cooperation between nonrelatives is common in humans. Reciprocal altruism is a plausible evolutionary mechanism for cooperation within unrelated pairs, as selection may favor individuals who selectively cooperate with those who have cooperated with them in the past. Reciprocity is often observed in humans, but there is only limited evidence of reciprocal altruism in other primate species, raising questions about the origins of human reciprocity. Here, we explore how reciprocity develops in a sample of American children ranging from 3 to 7.5years of age, and also compare children's behavior to that of chimpanzees in prior studies to gain insight into the phylogeny of human reciprocity. Children show a marked tendency to respond contingently to both prosocial and selfish acts, patterns that have not been seen among chimpanzees in prior studies. Our results show that reciprocity increases markedly with age in this population of children, and by about 5.5years of age children consistently match the previous behavior of their partners.
The psychological capacity to recognize that others may hold and act on false beliefs has been proposed to reflect an evolved, species-typical adaptation for social reasoning in humans; however, controversy surrounds the developmental timing and universality of this trait. Cross-cultural studies using elicited-response tasks indicate that the age at which children begin to understand false beliefs ranges from 4 to 7 years across societies, whereas studies using spontaneous-response tasks with Western children indicate that false-belief understanding emerges much earlier, consistent with the hypothesis that false-belief understanding is a psychological adaptation that is universally present in early childhood. To evaluate this hypothesis, we used three spontaneous-response tasks that have revealed early false-belief understanding in the West to test young children in three traditional, non-Western societies: Salar (China), Shuar/Colono (Ecuador) and Yasawan (Fiji). Results were comparable with those from the West, supporting the hypothesis that false-belief understanding reflects an adaptation that is universally present early in development.
Humans regularly engage in prosocial behavior that differs strikingly from that of even our closest living relatives, the chimpanzees (Pan troglodytes). In laboratory settings, chimpanzees are indifferent when given the opportunity to deliver valued rewards to conspecifics, while even very young human children have repeatedly been shown to behave prosocially. Although this broadly suggests that prosocial behavior in chimpanzees differs from that of young human children, the methods used in prior work with children have also differed from the methods used in studies of chimpanzees in potentially crucial ways. Here we test 92 pairs of 3–8-year-old children from urban American (Los Angeles, CA, USA) schools in a face-to-face task that closely parallels tasks used previously with chimpanzees. We found that children were more prosocial than chimpanzees have previously been in similar tasks, and our results suggest that this was driven more by a desire to provide benefits to others than a preference for egalitarian outcomes. We did not find consistent evidence that older children were more prosocial than younger children, implying that younger children behaved more prosocially in the current study than in previous studies in which participants were fully anonymous. These findings strongly suggest that humans are more prosocial than chimpanzees from an early age and that anonymity influences children's prosocial behavior, particularly at the youngest ages.
The sanctioning of norm-transgressors is a necessary—though often costly—task for maintaining a well-functioning society. Prior to effective and reliable secular institutions for punishment, large-scale societies depended on individuals engaging in ‘altruistic punishment’—bearing the costs of punishment individually, for the benefit of society. Evolutionary approaches to religion suggest that beliefs in powerful, moralizing Gods, who can distribute rewards and punishments, emerged as a way to augment earthly punishment in large societies that could not effectively monitor norm violations. In five studies, we investigate whether such beliefs in God can replace people's motivation to engage in altruistic punishment, and their support for state-sponsored punishment. Results show that, although religiosity generally predicts higher levels of punishment, the specific belief in powerful, intervening Gods reduces altruistic punishment and support for state-sponsored punishment. Moreover, these effects are specifically owing to differences in people's perceptions that humans are responsible for punishing wrongdoers.
We contrast the intergenerational mobility rates of the historically disadvantaged scheduled castes and tribes (SC / ST) in India with the rest of the workforce in terms of their education attainment, occupation choices and wages. Using survey data from successive rounds of the National Sample Survey between 1983 and 2005, we find that intergenerational education and income mobility rates of SC / STs have converged to non-SC / ST levels during this period. Moreover, SC / STs have matched non-SC / STs in occupation mobility rates. We conclude that the last 20 years of structural changes in India have coincided with a breaking down of caste-based barriers to socioeconomic mobility.
This paper presents a numerical method for solving stochastic general equilibrium models with dynamic portfolio choice. The method can be applied to models with heterogeneous agents, time-varying investment opportunity sets, and incomplete asset markets. We illustrate the method using a two-country model with production. We check the accuracy of our method by comparing the numerical solution to a complete markets version of the model against its known analytic properties. We then apply the method to an incomplete markets version where no analytic solution is available. In all versions the standard accuracy tests confirm the effectiveness of our method.
This paper proposes several testing procedures for comparison of misspecified calibrated models. The proposed tests are of the Vuong-type ( and ). In our framework, the econometrician selects values for model’s parameters in order to match some characteristics of data with those implied by the theoretical model. We assume that all competing models are misspecified, and suggest a test for the null hypothesis that they provide equivalent fit to data characteristics, against the alternative that one of the models is a better approximation. We consider both nested and non-nested cases. We also relax the dependence of models’ ranking on the choice of a weight matrix by suggesting averaged and sup-norm procedures. The methods are illustrated by comparing the cash-in-advance and portfolio adjustment cost models in their ability to match the impulse responses of output and inflation to money growth shocks.
This paper develops an open economy model with heterogeneous final goods producers who simultaneously choose whether to export their output and whether to use imported intermediates. Using the theoretical model, we develop and estimate a structural empirical model that incorporates heterogeneity in productivity, transport costs, and other costs using Chilean plant-level data for a set of manufacturing industries. The estimated model is consistent with many key features of the data regarding productivity, exporting, and importing. We perform a variety of counterfactual experiments to assess quantitatively the positive and normative effects of barriers to trade in import and export markets. These experiments suggest that there are substantial gains in aggregate productivity and welfare due to trade. Furthermore, because of import and export complementarities, policies which inhibit the importation of foreign intermediates can have a large adverse effect on the exportation of final goods.
This paper considers the estimation problem of structural models for which empirical restrictions are characterized by a fixed point constraint, such as structural dynamic discrete choice models or models of dynamic games. We analyze a local condition under which the nested pseudo likelihood (NPL) algorithm converges to a consistent estimator, and derive its convergence rate. We find that the NPL algorithm may not necessarily converge to a consistent estimator when the fixed point mapping does not have a local contraction property. To address the issue of divergence, we propose alternative sequential estimation procedures that can converge to a consistent estimator even when the NPL algorithm does not.
Cross-country income gaps are large in the data. Can observed investment prices account for these gaps? Our model adds an extensive margin to the neoclassical growth model by allowing for entry of firms. When combined with a “returns to variety” effect, our model provides an amplification mechanism from investment prices to output. Using cross-country data on relative investment prices, the model can explain up to 5 to 6-fold income differences between the richest and poorest countries in our sample while simultaneously reducing the implied cross-country TFP differences.
Objective Despite a rapidly growing economy and rising income levels in India, improvements in child malnutrition have lagged. Data from the most recent National Family Health Survey reveal that the infant and young child feeding (IYCF) practices recommended by the WHO and the Indian Government, including the timely introduction of solid food, are not being followed by a majority of mothers in India. It is puzzling that even among rich households children are not being fed adequately. The present study analyses the socio-economic factors that contribute to this phenomenon, including the role of nutritional information.
Design IYCF practices from the latest National Family Health Survey (2005–2006) were analysed. Multivariate logistic regression analyses were performed to establish the determinants of poor feeding practices. The indicators recommended by the WHO were used to assess the IYCF practices.
Setting India.
Subjects Children (n 9241) aged 6–18 months.
Results Wealth was shown to have only a small effect on feeding practices. For children aged 6–8 months, the mother's wealth status was not found to be a significant determinant of sound feeding practices. Strikingly, nutritional advice on infant feeding practices provided by health professionals (including anganwadi workers) was strongly correlated with improved practices across all age groups. Exposure to the media was also found to be a significant determinant.
Conclusions Providing appropriate information may be a crucial determinant of sound feeding practices. Efforts to eradicate malnutrition should include the broader goals of improving knowledge related to childhood nutrition and IYCF practices.
Suppose that the econometrician is interested in comparing two misspecified moment restriction models, where the comparison is performed in terms of some chosen measure of fit. This paper is concerned with describing an optimal test of the Vuong (1989) and Rivers and Vuong (2002) type null hypothesis that the two models are equivalent under the given measure of fit (the ranking may vary for different measures). We adopt the generalized Neyman–Pearson optimality criterion, which focuses on the decay rates of the type I and II error probabilities under fixed non-local alternatives, and derive an optimal but practically infeasible test. Then, as an illustration, by considering the model comparison hypothesis defined by the weighted Euclidean norm of moment restrictions, we propose a feasible approximate test statistic to the optimal one and study its asymptotic properties. Local power properties, one-sided test, and comparison under the generalized empirical likelihood-based measure of fit are also investigated. A simulation study illustrates that our approximate test is more powerful than the Rivers–Vuong test.
Preference for sons over daughters, evident in China's and South Asia's male sex ratios, is commonly rationalized by poverty and the need for old-age support. In this article we study South and East Asian immigrants to Canada, a group for whom the economic imperative to select sons is largely absent. Analyzing the 2001 and 2006 censuses, 20 percent samples, we find clear evidence of extensive sex selection in favor of boys at higher parities among South and East Asian immigrants unless they are Christian or Muslim. The latter finding accords with the explicit prohibition against (female) infanticide—traditionally the main sex-selection method—in these religions. Our findings point to a strong cultural component to both the preference for sons and the willingness to resort to induced abortion based on sex.
Over the past several decades there has been increasing interest in, and concern about, the economics of the world’s capture fishery resources. Massive amounts of resource rent are being lost because of inadequate management and the major rebuilding of fishery resources is called for.
This book draws together the latest economic theory of management of these resources, at both the national and international levels, and highlights where further research is urgently required. The emphasis is on world capture fisheries, rather than fisheries of specific regions, and examples come from both developed and developing countries. It combines economic theory and empirical testing with an examination and analysis of resource policy options, with a particular emphasis on fisheries management polices at the international level, where some of the most difficult resource management problems are found. The authors maintain that capture fishery resources are properly viewed as a part of society’s portfolio of natural capital assets. Consequently, a central theme of the book is that managing such resources should be viewed as asset management through time.
The Children of Eve is the first book to bring together general material about population and well-being in a single volume. It presents a world history of demographic and economic change that ranges broadly over time and space and which emphasizes the commonality of human experience.
We use employee-level panel data from a single firm to explore the possibility that individuals may select insurance coverage in part based on their anticipated behavioral ("moral hazard") response to insurance, a phenomenon we label "selection on moral hazard." Using a model of plan choice and medical utilization, we present evidence of heterogenous moral hazard as well as selection on it, and explore some of its implications. For example, we show that, at least in our context, abstracting from selection on moral hazard could lead to overestimates of the spending reduction associated with introducing a high-deductible health insurance option.
This paper develops tests for inequality constraints of nonparametric regression functions. The test statistics involve a one-sided version of Lp-type functionals of kernel estimators (1≤p<∞). Drawing on the approach of Poissonization, this paper establishes that the tests are asymptotically distribution free, admitting asymptotic normal approximation. In particular, the tests using the standard normal critical values have asymptotically correct size and are consistent against general fixed alternatives. Furthermore, we establish conditions under which the tests have nontrivial local power against Pitman local alternatives. Some results from Monte Carlo simulations are presented.
Given a class Λ of real functions and a twice differentiable real-valued map φ on , let Γ be an -valued functional on Λ of form , where Z and Y are random variables and X is a random vector. This paper calls Γ a conditional expectation functional. Conditional expectation functionals often arise in semiparametric models. The main contribution of this paper is that it provides nontrivial conditions under which Γ has a uniform modulus of continuity with order 2. Hence under these conditions, the functional Γ becomes very smooth.