PPML Estimation of Dynamic Discrete Choice Models with Aggregate Shocks

PPML Estimation of Dynamic Discrete Choice Models with Aggregate Shocks

This paper introduces a computationally efficient method for estimating structural parameters of dynamic discrete choice models with large choice sets. The method is based on Poisson pseudo maximum likelihood (PPML) regression, which is widely used...

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Bibliographic Details
Main Author: Artuc, Erhan
Format: Policy Research Working Paper
Language:English
en_US
Published: World Bank, Washington, DC 2013
Subjects:
AGRICULTURE
ASYMPTOTICALLY EQUIVALENT
BENCHMARK
CALIBRATION
COEFFICIENTS
CONSISTENT ESTIMATES
CONSUMER PRICE INDEX
CUMULATIVE DISTRIBUTION FUNCTION
DECISION MAKING
DEPENDENT VARIABLE
DESCRIPTIVE STATISTICS
DEVELOPMENT ECONOMICS
DEVELOPMENT POLICY
DEVELOPMENT RESEARCH
DISCOUNT RATE
DISTRIBUTIONAL ASSUMPTIONS
DYNAMIC MODELS
ECONOMETRICS
ECONOMICS LITERATURE
ECONOMICS RESEARCH
EQUATIONS
ERROR
ESTIMATORS
EXPECTED VALUE
EXPECTED VALUES
FIXED EFFECTS
INSTRUMENTAL VARIABLES
INTERNATIONAL TRADE
JOURNAL OF ECONOMETRICS
LARGE NUMBER
LIKELIHOOD FUNCTION
LINEAR REGRESSION
LINEAR TIME
LOGARITHMS
LOGIT ANALYSIS
MACROECONOMIC SHOCKS
MARGINAL PRODUCTS
MATRICES
MATRIX
MAXIMUM LIKELIHOOD
MAXIMUM LIKELIHOOD ESTIMATION
MODELING
MONTE CARLO SIMULATION
NUMBER OF OBSERVATIONS
NUMBER OF PARAMETERS
OPEN ECONOMY
ORTHOGONALITY
PANEL DATA
PERIOD T
PRECISION
PROBABILITIES
PROBABILITY
PROBABILITY DENSITY
PROBABILITY DENSITY FUNCTION
PRODUCTION FUNCTION
PRODUCTION FUNCTIONS
REGRESSION ANALYSIS
REGRESSION EQUATION
REGRESSION EQUATIONS
RESEARCH WORKING PAPERS
RISK NEUTRAL
SAMPLE SIZE
SCENARIOS
SIMULATION
SIMULATIONS
SMALL SAMPLE
STANDARD DEVIATION
STANDARD ERRORS
STATIONARY PROCESSES
STRUCTURAL ANALYSIS
STRUCTURAL PARAMETERS
TIME PERIOD
TIME SERIES
TIME TRENDS
TRADE POLICY
UTILITY FUNCTION
WAGES
WEIGHTING
Poisson pseudo maximum likelihood
labor mobility
migration
discrete choice models
gravity equation
Online Access:http://documents.worldbank.org/curated/en/2013/06/17849032/ppml-estimation-dynamic-discrete-choice-models-aggregate-shocks
http://hdl.handle.net/10986/15841
Description
Summary:This paper introduces a computationally efficient method for estimating structural parameters of dynamic discrete choice models with large choice sets. The method is based on Poisson pseudo maximum likelihood (PPML) regression, which is widely used in the international trade and migration literature to estimate the gravity equation. Unlike most of the existing methods in the literature, it does not require strong parametric assumptions on agents' expectations, thus it can accommodate macroeconomic and policy shocks. The regression requires count data as opposed to choice probabilities; therefore it can handle sparse decision transition matrices caused by small sample sizes. As an example application, the paper estimates sectoral worker mobility in the United States.

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