Heterogeneity and Microeconometrics Modelling

Martin Browning and Jesus Carro

No 2006-03, CAM Working Papers from University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics

Abstract: Presented at the 2005 Econometric Society World Congress Plenary Session on "Modelling Heterogeneity". We survey the treatment of heterogeneity in applied microeconometrics analyses. There are three themes. First, there is usually much more heterogeneity than empirical researchers allow for. Second, the inappropriate treatment of heterogeneity can lead to serious error when estimating outcomes of interest. Finally, once we move away from the traditional linear model with a single 'fixed effect', it is very difficult to account for heterogeneity and fit the data and maintain coherence with theory structures. The latter task is one for economists: "heterogeneity is too important to be left to the statisticians". The paper concludes with a report of our own research on dynamic discrete choice models that allow for maximal heterogeneity.

Keywords: heterogeneity; applied microeconometrics; fixed effects; dyanamic discrete choice (search for similar items in EconPapers)
JEL-codes: C30 C33 C51 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2006-01
New Economics Papers: this item is included in nep-dcm, nep-dev and nep-ecm
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Citations: View citations in EconPapers (39)

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