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Sensitivity of Estimation Precision to Moments with an Application to a Model of Joint Retirement Planning of Couples

Author

Listed:
  • Bo E. Honoré

    (Institute for Fiscal Studies and Princeton)

  • Thomas Jorgensen

    (Institute for Fiscal Studies and University of Copenhagen)

  • Áureo de Paula

    (Institute for Fiscal Studies and University College London)

Abstract

This paper introduces measures for how each moment contributes to the precision of the parameter estimates in GMM settings. For example, one of the measures asks what would happen to the variance of the parameter estimates if a particular moment was dropped from the estimation. The measures are all easy to compute. We illustrate the usefulness of the measures through two simple examples as well as an application to a model of joint retirement planning of couples. We estimate the model using the UK-BHPS, and we ?nd evidence of complementarities in leisure. Our sensitivity measures illustrate that the precision of the estimate of the complementarity is primarily driven by the distribution of the di?erences in planned retirement dates. The estimated econometric model can be interpreted as a bivariate ordered choice model that allows for simultaneity. This makes the model potentially useful in other applications.

Suggested Citation

  • Bo E. Honoré & Thomas Jorgensen & Áureo de Paula, 2019. "Sensitivity of Estimation Precision to Moments with an Application to a Model of Joint Retirement Planning of Couples," CeMMAP working papers CWP36/19, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:cemmap:36/19
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    References listed on IDEAS

    as
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