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Is it different for zeros? Discriminating between models for non-negative data with many zeros

  • J. M. C. Santos Silva

    (Institute for Fiscal Studies)

  • Silvana Tenreyro

    (Institute for Fiscal Studies)

  • Frank Windmeijer

    ()

    (Institute for Fiscal Studies and University of Bristol)

In many economic applications, the variate of interest is non-negative and its distribution is characterized by a mass-point at zero and a long right-tail. Many regression strategies have been proposed to deal with data of this type. 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, or to assess the validity of the preferred model, are not often used in practice. In this paper we propose a novel and simple regression-based specification test that can be used to test these models against each other.

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File URL: http://cemmap.ifs.org.uk/wps/cwp2010.pdf
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Paper provided by Centre for Microdata Methods and Practice, Institute for Fiscal Studies in its series CeMMAP working papers with number CWP20/10.

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Date of creation: Jul 2010
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Handle: RePEc:ifs:cemmap:20/10
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  1. J M C Santos Silva, 1996. "A Score Test for Non-nested Hypotheses with Applications to Discrete Data Models," Discussion Papers 96-28 ISSN 1350-6722, University College London, Department of Economics.
  2. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
  3. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
  4. J. M. C. Santos Silva & Silvana Tenreyro, 2009. "Further Simulation Evidence on the Performance of the Poisson Pseudo-Maximum Likelihood Estimator," CEP Discussion Papers dp0933, Centre for Economic Performance, LSE.
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