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Nonparametric estimation of non-exchangeable latent-variable models

Author

Listed:
  • Bonhomme, Stéphane
  • Jochmans, Koen
  • Robin, Jean-Marc

Abstract

We propose a two-step method to nonparametrically estimate multivariate models in which the observed outcomes are independent conditional on a discrete latent variable. Applications include microeconometric models with unobserved types of agents, regime-switching models, and models with misclassification error. In the first step, we estimate weights that transform moments of the marginal distribution of the data into moments of the conditional distribution of the data for given values of the latent variable. In the second step, these conditional moments are estimated as weighted sample averages. We illustrate the method by estimating a model of wages with unobserved heterogeneity on PSID data.

Suggested Citation

  • Bonhomme, Stéphane & Jochmans, Koen & Robin, Jean-Marc, 2017. "Nonparametric estimation of non-exchangeable latent-variable models," Journal of Econometrics, Elsevier, vol. 201(2), pages 237-248.
  • Handle: RePEc:eee:econom:v:201:y:2017:i:2:p:237-248
    DOI: 10.1016/j.jeconom.2017.08.006
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    More about this item

    Keywords

    Latent variable models; Unobserved heterogeneity; Finite mixtures; Hidden Markov models; Nonparametric estimation; Panel data; Wage dynamics;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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