Inferring inequality: Testing for median-preserving spreads in ordinal data

Ramses Abul Naga, Christopher Stapenhurst and Gaston Yalonetzky

Econometric Reviews, 2024, vol. 43, issue 2-4, 156-174

Abstract: The median-preserving spread (MPS) ordering for ordinal variables has become ubiquitous in the inequality literature. We devise statistical tests of the hypothesis that a distribution G is not an MPS of a distribution F. Rejecting this hypothesis enables the conclusion that G is more unequal than F according to the MPS criterion. Monte Carlo simulations and novel graphical techniques show that a simple, asymptotic Z test is sufficient for most applications. We illustrate our tests with two applications: happiness inequality in the US and self-assessed health in Europe.

Date: 2024
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Working Paper: Inferring Inequality: Testing for Median-Preserving Spreads in Ordinal Data (2021)
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DOI: 10.1080/07474938.2024.2306069

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