Estimating heterogeneous effects: applications to labor economics

Stéphane Bonhomme and Angela Denis
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Stéphane Bonhomme: UNIVERSITY OF CHICAGO

No 2414, Working Papers from Banco de España

Abstract: A growing number of applications involve settings where, in order to infer heterogeneous effects, a researcher compares various units. Examples of research designs include children moving between different neighborhoods, workers moving between firms, patients migrating from one city to another, and banks offering loans to different firms. We present a unified framework for these settings, based on a linear model with normal random coefficients and normal errors. Using the model, we discuss how to recover the mean and dispersion of effects, other features of their distribution, and how to construct predictors of the effects. We provide moment conditions on the model’s parameters, and outline various estimation strategies. One of the main objectives of the paper is to clarify some of the underlying assumptions by highlighting their economic content, and to discuss and inform some of the key practical choices.

Keywords: heterogeneity; neighborhoods; firms; workers; variance components; shrinkage (search for similar items in EconPapers)
JEL-codes: C10 C50 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2024-05
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https://www.bde.es/f/webbe/SES/Secciones/Publicaci ... 24/Files/dt2414e.pdf First version, May 2024 (application/pdf)

Related works:
Journal Article: Estimating heterogeneous effects: Applications to labor economics (2024)
Working Paper: Estimating Heterogeneous Effects: Applications to Labor Economics (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2414

DOI: 10.53479/36556

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