Semiparametric testing of non-nested models: an application to Engel Curves specification

Juan Mora

DES - Working Papers. Statistics and Econometrics. WS from Universidad Carlos III de Madrid. Departamento de Estadística

Abstract: This paper proposes a specification test for non-nested semiparametrically specified competing models. The test-statistic is based on an artificial regression procedure. We derive the asymptotic distribution of the test-statistic under the null and alternative hypotheses and the finite-sample properties of the test are studied by means of simulations. The test is applied to discriminate between alternative Engel Curve specifications in share form, which relate total expenditure (X) with percentage of total expenditure spent on a specific good (Y). With data from the 1980 Spanish Family Expenditure Survey, one of the considered forms explains adequately the behaviour of households not contained on the tails of the distribution of X; when the whole data set is used both specifications are rejected possibly due to the fact that seemingly there is not mean dependence between Y and X for households with high total expenditure.

Keywords: Non-nested; tests; Artificial; nesting; Semiparametric; regression; k-nearest; neighbours; Engel; Curves (search for similar items in EconPapers)
Date: 1994-09
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Persistent link: https://EconPapers.repec.org/RePEc:cte:wsrepe:3953

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