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Another Look at the Identification of Dynamic Discrete Decision Processes: With an Application to Retirement Behavior

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Author Info
Victor Aguirregabiria

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Abstract

This paper deals with the estimation of the behavioral and welfare effects of counterfactual policy interventions in dynamic structural models where all the primitive functions are nonparametrically specified (i.e., preferences, technology, transition rules, and distribution of unobserved variables). It proves the nonparametric identification of agents' decision rules, before and after the policy intervention, and of the change in agents' welfare. Based on these results we propose a nonparametric procedure to estimate the behavioral and welfare effects of a general class of counterfactual policy interventions. The nonparametric estimator can be used to construct a test of the validity of a particular parametric specification. We apply this method to evaluate hypothetical reforms in the rules of a public pension system using a model of retirement behavior and a sample of workers in Sweden.

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Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-282.

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Length: 46 pages
Date of creation: 27 Mar 2007
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Handle: RePEc:tor:tecipa:tecipa-282

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Related research
Keywords: Dynamic discrete decision processes; Nonparametric identification; Counterfactual policy interventions; Retirement behavior.;

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Find related papers by JEL classification:
C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Victor Aguirregabiria & Pedro mira, 2007. "Dynamic Discrete Choice Structural Models: A Survey," Working Papers tecipa-297, University of Toronto, Department of Economics. [Downloadable!]
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