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Abstract:

DARP Paper
Choosing Between Two Income Distribution Models with Contaminated Data, (revised version published in the Journal of the Royal Statistical Society, Serie B, 15 (1997), pp. 715-727)
Maria-Pia Victoria-Feser March 1996
Paper No' DARP 018:
Full Paper (pdf)

Tags: m-estimators; model choice; robust tests; income distribution; linear regression

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 examples