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A two‐sample test for threshold crossing latent variables with application to valuation studies
Author(s) -
Belluzzo Walter
Publication year - 2006
Publication title -
journal of the royal statistical society: series c (applied statistics)
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.205
H-Index - 72
eISSN - 1467-9876
pISSN - 0035-9254
DOI - 10.1111/j.1467-9876.2006.00543.x
Subject(s) - econometrics , valuation (finance) , sort , mathematics , covariate , statistics , latent variable , permutation (music) , willingness to pay , actuarial science , economics , finance , physics , arithmetic , acoustics , microeconomics
Summary. Contingent valuation researchers are often interested in a comparison of the underlying willingness‐to‐pay distributions in two independent studies. Since willingness to pay is not observable, traditional testing procedures for comparing distributions cannot be applied directly. The paper proposes a permutation test for this sort of comparison. The main distinguishing characteristic of the test proposed is that it does not rely on asymptotic approximations and facilitates the introduction of covariates. The permutation test is illustrated with the case of projects of investment for the improvement of two important Brazilian river basins.