Identifying the Discount Factor in Dynamic Discrete Choice Models

Jaap Abbring and Daljord, Øystein

No 11133, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The identification of the discount factor in dynamic discrete models is important for counterfactual analysis, but hard. Existing approaches either take the discount factor to be known or rely on high level exclusion restrictions that are difficult to interpret and hard to satisfy in applications, in particular in industrial organization. We provide identification results under an exclusion restriction on primitive utility that is more directly useful to applied researchers. We also show that our and existing exclusion restrictions limit the choice and state transition probability data in different ways; that is, they give the model nontrivial and distinct empirical content.

Keywords: Discount factor; Dynamic discrete choice; Empirical content; Identification (search for similar items in EconPapers)
JEL-codes: C14 C25 D91 D92 (search for similar items in EconPapers)
Date: 2016-02
New Economics Papers: this item is included in nep-dcm and nep-ecm
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Citations: View citations in EconPapers (2)

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