RANDOMIZATION TESTS IN ECONOMETRICS

Numerous shufflings of data produce a distribution of test-statistic v alues that can be used to assess the degree to which the test-statisti c value produced by the actual data is unusual. Because this controver sial randomization-testing methodology, made partical by the computer revolution, has begun to appear in applied econometric studies, econom etricians should become familiar with its mechanics, rationale, and in terpretation, all of which are quite different from the status quo. Th is article exposits randomization tests in an econometric context, dis cusses their advantages, and alerts practitioners to pitfalls.