Evidence against Imposing Restrictions on Hurdle Models as a Test for Simultaneous versus Sequential Decision Making

Abstract Agricultural economists frequently employ hurdle models to estimate the determinants of truncated outcomes such as market participation and adoption. A pervasive belief is that restrictions can be placed on hurdle models to test whether the decisions made in the underlying data-generating process occurred sequentially or simultaneously. This article argues against the ability to draw this conclusion and further submits there is a negative correlation between failing to reject these restrictions and sample size. Evidence to support both proposals comes from data collected in a natural setting, as well as simulated data with a known data-generating mechanism.