A Nonparametric Test of $m$th-degree Inverse Stochastic Dominance

Author:

Hongyi Jiang, Zhenting Sun, Shiyun Hu

Keyword:

Economics, Econometrics, Econometrics (econ.EM)

journal:

date:

2023-06-20 16:00:00

Abstract

This paper proposes a nonparametric test for $m$th-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.

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