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, 18
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.
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Working Paper: Testing competing models for non-negative data with many zeros (2015)
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