Log Income vs. Linear Income: An Application of the Encompassing Principle*
应用包容性原则，针对I(1)数据提出对数与线性个体方程的设定检验和误设检验，并以美国季度可支配收入为例进行实证分析，通过蒙特卡洛实验考察检验的有限样本性质。
Abstract An open question in empirical economics is whether models should be estimated by using the actual, or linear, values of economic variables or their logarithms. This paper applies the principle of encompassing to suggest specification and mis‐specification tests of log vs. linear individual equations fitted to I (1) data, and illustrates the analysis for US quarterly disposable income. The finite‐sample properties of the encompassing tests are examined in a Monte Carlo experiment customized to the parameter values found in the empirical analysis.