A nonparametric test of mth-degree inverse stochastic dominance

Hongyi Jiang, Zhenting Sun and Shiyun Hu

Economics Letters, 2024, vol. 244, issue C

Abstract: This paper proposes a nonparametric test for mth-degree inverse stochastic dominance which is a powerful tool for ranking distribution functions according to social welfare. We construct the test based on empirical process theory. The test is shown to be asymptotically size controlled and consistent. The good finite sample properties of the test are illustrated via Monte Carlo simulations. We apply our test to the inequality growth in the United Kingdom from 1995 to 2010, and obtain a more complete ranking of the income distributions.

Keywords: Inverse stochastic dominance; Social welfare; Nonparametric test; Ranking distribution functions (search for similar items in EconPapers)
JEL-codes: C12 C14 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:244:y:2024:i:c:s0165176524004622

DOI: 10.1016/j.econlet.2024.111978

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