TESTING NONNESTED MODELS

Applied economic research often involves testing between nonnested models. In such situations informal criteria are often used in preference to readily available testing procedures. This article deals with regression-based tests between nonnested models, showing the development of the J- and JA-tests from the Cox principle. Testing between linear and log-linear models is discussed as an example of how tests can be constructed when the dependent variables of competing models have a monotonic functional relationship. An empirical example is given to illustrate the procedures.