Modeling Threshold Effects with Kinked Regression: Methods, Applications, and Replicable Code

Kinked regression is a powerful econometric method for capturing structural changes or threshold effects in the relationships among variables. This technique allows for slope shifts at a specific threshold—the kink point—while maintaining continuity in the dependent variable. Unlike standard linear regression, kinked regression accommodates piecewise linear relationships, making it particularly valuable for analyzing behavioral or policy responses at critical thresholds. Applications span diverse fields including labor economics, environmental science, finance, and policy evaluation. This document provides a comprehensive introduction to kinked regression methodology, distinguishes it from threshold regression, and offers practical implementation guides with replicable STATA and R code.