Regression Kink Design

Unemployment benefits replace 50% of past earnings up to a cap (the kink at 0, left panel). The outcome's slope changes at the kink by β × (−0.5); dividing the slope change by the schedule's slope change estimates β. Slopes are estimated with local polynomials on each side; curvature in the outcome biases local linear slopes, and local quadratic fits are much noisier.