Bootstrap-based tests for the total time on test and the excess wealth orders

TL;DR

This paper introduces bootstrap-based nonparametric tests for stochastic dominance in total time on test and excess wealth orders, providing consistent inference methods and goodness-of-fit tests for NBUE distributions.

Contribution

It develops new bootstrap-based tests for total time on test and excess wealth orders, including goodness-of-fit tests for NBUE distributions, advancing nonparametric stochastic dominance testing.

Findings

Tests are consistent and reliable.

Bootstrap critical values improve inference accuracy.

New goodness-of-fit tests for NBUE distributions are proposed.

Abstract

Given a pair of non-negative random variables $X$ and $Y$, we introduce a class of nonparametric tests for the null hypothesis that $X$ dominates $Y$ in the total time on test order. Critical values are determined using bootstrap-based inference, and the tests are shown to be consistent. The same approach is used to construct tests for the excess wealth order. As a byproduct, we also obtain a class of goodness-of-fit tests for the NBUE (New Better than Used in Expectation) family of distributions.