Linear IV Regression Estimators for Structural Dynamic Discrete Choice Models
Paul T. Scott and
No 13240, CEPR Discussion Papers from C.E.P.R. Discussion Papers
In structural dynamic discrete choice models, the presence of serially correlated unobserved states and state variables that are measured with error may lead to biased parameter estimates and misleading inference. In this paper, we show that instrumental variables can address these issues, as long as measurement problems involve state variables that evolve exogenously from the perspective of individual agents (i.e., market-level states). We define a class of linear instrumental variables estimators that rely on Euler equations expressed in terms of conditional choice probabilities (ECCP estimators). These estimators do not require observing or modeling the agent's entire information set, nor solving or simulating a dynamic program. As such, they are simple to implement and computationally light. We provide constructive identification arguments to identify the model primitives, and establish the consistency and asymptotic normality of the estimator. A Monte Carlo study demonstrates the good finite-sample performance of the ECCP estimator in the context of a dynamic demand model for durable goods.
New Economics Papers: this item is included in nep-dcm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at email@example.com
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:13240
Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=13240
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().