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Estimation of Threshold Distributions for Market Participation

Author

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  • Mattia Guerini
  • Patrick Musso
  • Lionel Nesta

Abstract

We develop a new method to estimate the parameters of threshold distributions for market participation based upon an agent-specific attribute and its decision outcome. This method requires few behavioral assumptions, is not data demanding, and can adapt to various parametric distributions. Monte Carlo simulations show that the algorithm successfully recovers three different parametric distributions and is resilient to assumption violations. An application to export decisions by French firms shows that threshold distributions are generally right-skewed. We then reveal the asymmetric effects of past policies over different quantiles of the threshold distributions.

Suggested Citation

  • Mattia Guerini & Patrick Musso & Lionel Nesta, 2020. "Estimation of Threshold Distributions for Market Participation," LEM Papers Series 2020/09, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  • Handle: RePEc:ssa:lemwps:2020/09
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    References listed on IDEAS

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    More about this item

    Keywords

    Parametric Distributions of Thresholds; Maximum Likelihood Estimation; Fixed Costs; Export Decision.;
    All these keywords.

    JEL classification:

    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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