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Maximum likelihood and economic modeling

Author

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  • Gauthier Lanot

    (Umeå University, Sweden)

Abstract

Most of the data available to economists is observational rather than the outcome of natural or quasi experiments. This complicates analysis because it is common for observationally distinct individuals to exhibit similar responses to a given environment and for observationally identical individuals to respond differently to similar incentives. In such situations, using maximum likelihood methods to fit an economic model can provide a general approach to describing the observed data, whatever its nature. The predictions obtained from a fitted model provide crucial information about the distributional outcomes of economic policies.

Suggested Citation

  • Gauthier Lanot, 2017. "Maximum likelihood and economic modeling," IZA World of Labor, Institute of Labor Economics (IZA), pages 326-326, January.
    • Handle: RePEc:iza:izawol:journl:y:2017:n:326
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    log-likelihood; economic model; parameter estimates;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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