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

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  • Ramses H. Abul Naga
  • Christopher Stapenhurst
  • Gaston Yalonetzky

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.

Suggested Citation

  • Ramses H. Abul Naga & Christopher Stapenhurst & Gaston Yalonetzky, 2024. "Inferring inequality: Testing for median-preserving spreads in ordinal data," Econometric Reviews, Taylor & Francis Journals, vol. 43(2-4), pages 156-174, April.
    • Handle: RePEc:taf:emetrv:v:43:y:2024:i:2-4:p:156-174
    DOI: 10.1080/07474938.2024.2306069
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