Manipulation testing based on density discontinuity

Abstract

In this article, we introduce two community-contributed commands, rddensity and rdbwdensity, that implement automatic manipulation tests based on density discontinuity and are constructed using the results for local-polynomial density estimators in Cattaneo, Jansson, and Ma (2017b, Simple local polynomial density estimators, Working paper, University of Michigan). These new tests exhibit better size properties (and more power under additional assumptions) than other conventional approaches currently available in the literature. The first command, rddensity, implements manipulation tests based on a novel local-polynomial density estimation technique that avoids prebinning of the data (improving size properties) and allows for restrictions on other features of the model (improving power properties). The second command, rdbwdensity, implements several bandwidth selectors specifically tailored for the manipulation tests discussed herein. We also provide a companion R package with the same syntax and capabilities as rddensity and rdbwdensity.