A Nearly Similar Powerful Test for Mediation

Kees Jan van Garderen; Noud P. A. van Giersbergen

doi:10.1162/rest_a_01465

A Nearly Similar Powerful Test for Mediation

Kees Jan van Garderen¹; Noud P. A. van Giersbergen²

¹ Amsterdam School of Economics University of Amsterdam [email protected] · ² Amsterdam School of Economics University of Amsterdam [email protected]

The Review of Economics and Statistics 2024

Abstract We derive a new powerful, simple test for mediation. Testing for mediation is empirically important and the no-mediation hypothesis H0:θ1θ2=0 poses a theoretical problem, nonregular at the origin, where standard tests have extremely low rejection probabilities. We prove that a similar test only exists if 1/α∈N. It is unique, but with unfortunate properties. An innovative varying-g method is introduced to derive a nearly similar test, gopt, with power close to the envelope without these undesirable properties, and a second, less similar test, g1.2, with more empirical appeal. Results are illustrated in an educational setting.

DOI: 10.1162/rest_a_01465
Pages: 1-26
Language: en
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