An Overview Of Parametric And Non-parametric Tests Used In Economic Studies

Abstract

Selecting the appropriate statistical test is a fundamental step in research, particularly when analyzing relationships and differences between variables. Many students and researchers face difficulties in deciding whether to use parametric or non-parametric tests, leading to potential errors in data interpretation. This paper provides a guide to understanding the key differences between parametric and nonparametric tests and their underlying assumptions. Parametric tests assume normality, homogeneity of variance, and interval/ratio data, whereas non-parametric alternatives are used when these assumptions are violated, particularly with ordinal or nonnormally distributed data.