Permutation tests for experimental data

Charles Holt and Sean Sullivan

Experimental Economics, 2023, vol. 26, issue 4, No 3, 775-812

Abstract: Abstract This article surveys the use of nonparametric permutation tests for analyzing experimental data. The permutation approach, which involves randomizing or permuting features of the observed data, is a flexible way to draw statistical inferences in common experimental settings. It is particularly valuable when few independent observations are available, a frequent occurrence in controlled experiments in economics and other social sciences. The permutation method constitutes a comprehensive approach to statistical inference. In two-treatment testing, permutation concepts underlie popular rank-based tests, like the Wilcoxon and Mann–Whitney tests. But permutation reasoning is not limited to ordinal contexts. Analogous tests can be constructed from the permutation of measured observations—as opposed to rank-transformed observations—and we argue that these tests should often be preferred. Permutation tests can also be used with multiple treatments, with ordered hypothesized effects, and with complex data-structures, such as hypothesis testing in the presence of nuisance variables. Drawing examples from the experimental economics literature, we illustrate how permutation testing solves common challenges. Our aim is to help experimenters move beyond the handful of overused tests in play today and to instead see permutation testing as a flexible framework for statistical inference.

Keywords: Permutation test; Randomization test; Experimental economics; Nonparametric (search for similar items in EconPapers)
JEL-codes: C12 C14 C90 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s10683-023-09799-6

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