Estimating Penalized Spline Regressions: Theory and Application to Economics

Abstract

In this paper we give a brief survey of penalized spline smoothing. Penalized spline smoothing is a general non-parametric estimation technique which allows to fit smooth but else unspecified functions to empirical data. While penalized spline regressions are quite popular in natural sciences only few applications can be found in economics. We present an example demonstrating how this non-parametric estimation technique can help to gain insights into economics.

Keywords: Non-parametric estimation, penalized spline smoothing, generalized additive models

JEL Classification: C140