Testing competing models for non-negative data with many zeros

João Santos Silva, Silvana Tenreyro and Frank Windmeijer

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: In economic applications it is often the case that the variate of interest is non-negative and its distribution has a mass-point at zero. Many regression strategies have been proposed to deal with data of this type but, although there has been a long debate in the literature on the appropriateness of different models, formal statistical tests to choose between the competing specifications are not often used in practice. We use the non-nested hypothesis testing framework of Davidson and MacKinnon (Davidson and MacKinnon 1981. “Several Tests for Model Specification in the Presence of Alternative Hypotheses.” Econometrica 49: 781–793.) to develop a novel and simple regression-based specification test that can be used to discriminate between these models.

Keywords: health economics; international trade; non-nested hypotheses; C test; P test (search for similar items in EconPapers)
JEL-codes: C12 C52 (search for similar items in EconPapers)
Date: 2015-01
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (31)

Published in Journal of Econometric Methods, January, 2015, 4(1), pp. 29-46. ISSN: 2156-6674

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Related works:
Journal Article: Testing Competing Models for Non-negative Data with Many Zeros (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:63663

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