Testing Competing Models for Non-negative Data with Many Zeros

João Santos Silva, Silvana Tenreyro and Frank Windmeijer

Journal of Econometric Methods, 2015, vol. 4, issue 1, 29-46

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
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Citations: View citations in EconPapers (36)

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DOI: 10.1515/jem-2013-0005

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