Generic Inference on Quantile and Quantile Effect Functions for Discrete Outcomes

TL;DR

This paper develops a universal, practical method for constructing simultaneous confidence bands for quantile and quantile effect functions of discrete variables, applicable across various modeling approaches and sampling schemes.

Contribution

It introduces a generic, transformation-based approach for inference on quantile functions of discrete outcomes, extending existing methods to handle discrete data.

Findings

Insurance coverage increases doctor visits across the distribution.

Racial test score gap is small early but widens with age.

Method enables valid inference for discrete outcomes' quantile functions.

Abstract

Quantile and quantile effect functions are important tools for descriptive and causal analyses due to their natural and intuitive interpretation. Existing inference methods for these functions do not apply to discrete random variables. This paper offers a simple, practical construction of simultaneous confidence bands for quantile and quantile effect functions of possibly discrete random variables. It is based on a natural transformation of simultaneous confidence bands for distribution functions, which are readily available for many problems. The construction is generic and does not depend on the nature of the underlying problem. It works in conjunction with parametric, semiparametric, and nonparametric modeling methods for observed and counterfactual distributions, and does not depend on the sampling scheme. We apply our method to characterize the distributional impact of insurance coverage on health care utilization and obtain the distributional decomposition of the racial test score gap. We find that universal insurance coverage increases the number of doctor visits across the entire distribution, and that the racial test score gap is small at early ages but grows with age due to socio economic factors affecting child development especially at the top of the distribution. These are new, interesting empirical findings that complement previous analyses that focused on mean effects only. In both applications, the outcomes of interest are discrete rendering existing inference methods invalid for obtaining uniform confidence bands for observed and counterfactual quantile functions and for their difference -- the quantile effects functions.