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Heterogeneity and Microeconometrics Modelling

Author

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  • Martin Browning

    (Department of Economics, University of Copenhagen)

  • Jesus Carro

    (Department of Economics, Carlos III, Madrid)

Abstract

Presented at the 2005 Econometric Society World Congress Plenary Session on "Modelling Heterogeneity". We survey the treatment of heterogeneity in applied microeconometrics analyses. There are three themes. First, there is usually much more heterogeneity than empirical researchers allow for. Second, the inappropriate treatment of heterogeneity can lead to serious error when estimating outcomes of interest. Finally, once we move away from the traditional linear model with a single 'fixed effect', it is very difficult to account for heterogeneity and fit the data and maintain coherence with theory structures. The latter task is one for economists: "heterogeneity is too important to be left to the statisticians". The paper concludes with a report of our own research on dynamic discrete choice models that allow for maximal heterogeneity.

Suggested Citation

  • Martin Browning & Jesus Carro, 2006. "Heterogeneity and Microeconometrics Modelling," CAM Working Papers 2006-03, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
    • Handle: RePEc:kud:kuieca:2006_03
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    File URL: http://www.econ.ku.dk/cam/wp0910/wp0406/2006-03.pdf/
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    References listed on IDEAS

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    More about this item

    Keywords

    heterogeneity; applied microeconometrics; fixed effects; dyanamic discrete choice;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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