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Choosing between two income distribution models with contaminated data

By Maria-Pia Victoria-Feser

Abstract

Choosing between two income distribution models typically involves testing two non-tested hypotheses, that is hypotheses such that one cannot be obtained as a special or limiting case of the other. Cox (1961, 1962) proposed a classical testing procedure based on the comparison of the maximised likelihood functions for the two models. In this paper it is shown that such a procedure is not robust in that a single observation can reverse the decision. Its robustness properties as well as other properties are shown in simulated example

Topics: HB Economic Theory
Publisher: Suntory and Toyota Centres for Economics and Related Disciplines, London School of Economics and Political Science
Year: 1996
OAI identifier: oai:eprints.lse.ac.uk:6611
Provided by: LSE Research Online
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