Bayesian Procedures as a Numerical Tool for the Estimation of Dynamic Discrete Choice Models
AbstractDynamic discrete choice models usually require a general specification of unobserved heterogeneity. In this paper, we apply Bayesian procedures as a numerical tool for the estimation of a female labor supply model based on a sample size which is typical for common household panels. We provide two important results for the practitioner: First, for a specification with a multivariate normal distribution for the unobserved heterogeneity, the Bayesian MCMC estimator yields almost identical results as a classical Maximum Simulated Likelihood (MSL) estimator. Second, we show that when imposing distributional assumptions which are consistent with economic theory, e.g. log-normally distributed consumption preferences, the Bayesian method performs well and provides reasonable estimates, while the MSL estimator does not converge. These results indicate that Bayesian procedures can be a beneficial tool for the estimation of dynamic discrete choice models.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6544.
Length: 21 pages
Date of creation: May 2012
Date of revision:
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Other versions of this item:
- Peter Haan & Daniel Kemptner & Arne Uhlendorff, 2012. "Bayesian Procedures as a Numerical Tool for the Estimation of Dynamic Discrete Choice Models," Discussion Papers of DIW Berlin 1210, DIW Berlin, German Institute for Economic Research.
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
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- Akay, Alpaslan, 2009. "Dynamics of the Employment Assimilation of First-Generation Immigrant Men in Sweden: Comparing Dynamic and Static Assimilation Models with Longitudinal Data," IZA Discussion Papers 4655, Institute for the Study of Labor (IZA).
- Kurowska, Anna & Myck, Michal & Wrohlich, Katharina, 2012.
"Family and Labor Market Choices: Requirements to Guide Effective Evidence-Based Policy,"
IZA Discussion Papers
6846, Institute for the Study of Labor (IZA).
- Anna Kurowska & Michal Myck & Katharina Wrohlich, 2012. "Family and Labor Market Choices: Requirements to Guide Effective Evidence-Based Policy," Discussion Papers of DIW Berlin 1234, DIW Berlin, German Institute for Economic Research.
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