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Simple and effective boundary correction for kernel densities and regression with an application to the world income and Engel curve estimation

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  • Dai, J.
  • Sperlich, S.

Abstract

In both nonparametric density estimation and regression, the so-called boundary effects, i.e. the bias and variance increase due to one sided data information, can be quite serious. For estimation performed on transformed variables this problem can easily get boosted and may distort substantially the final estimates, and consequently the conclusions. After a brief review of some existing methods a new, straightforward and very simple boundary correction is proposed, applying local bandwidth variation at the boundaries. The statistical behavior is discussed and the performance for density and regression estimation is studied for small and moderate sample sizes. In a simulation study this method is shown to perform very well. Furthermore, it appears to be excellent for estimating the world income distribution, and Engel curves in economics.

Suggested Citation

  • Dai, J. & Sperlich, S., 2010. "Simple and effective boundary correction for kernel densities and regression with an application to the world income and Engel curve estimation," Computational Statistics & Data Analysis, Elsevier, vol. 54(11), pages 2487-2497, November.
    • Handle: RePEc:eee:csdana:v:54:y:2010:i:11:p:2487-2497
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    References listed on IDEAS

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    1. Hajo Holzmann & Sebastian Vollmer & Julian Weisbrod, 2007. "Perspectives on the World Income Distribution - Beyond Twin Peaks Towards Welfare Conclusions," Ibero America Institute for Econ. Research (IAI) Discussion Papers 158, Ibero-America Institute for Economic Research.
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    4. Xavier Sala-i-Martin, 2006. "The World Distribution of Income: Falling Poverty and … Convergence, Period," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(2), pages 351-397.
    5. Joachim Engel & Alois Kneip, 1996. "Recent approaches to estimating Engel curves," Journal of Economics, Springer, vol. 63(2), pages 187-212, June.
    6. Hall, Peter, 1983. "On near neighbour estimates of a multivariate density," Journal of Multivariate Analysis, Elsevier, vol. 13(1), pages 24-39, March.
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