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Identification and Estimation of Nonparametric Hedonic Equilibrium Model with Unobserved Quality

Author

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  • Ruoyao Shi

    (Department of Economics, University of California Riverside)

Abstract

This paper studies a nonparametric hedonic equilibrium model in which certain product characteristics are unobserved. Unlike most previously studied hedonic models, both the observed and unobserved agent heterogeneities enter the structural functions nonparametrically. Prices are endogenously determined in equilibrium. Using both within- and cross-market price variation, I show that all the structural functions of the model are nonparametrically identified up to normalization. In particular, the unobserved product quality function is identified if the relative prices of the agent characteristics differ in at least two markets. Following the constructive identification strategy, I provide easy- to-implement series minimum distance estimators of the structural functions and derive their consistency and uniform rates of convergence. To illustrate the estimation procedure, I estimate the unobserved efficiency of American full-time workers as a function of age and unobserved ability.

Suggested Citation

  • Ruoyao Shi, 2018. "Identification and Estimation of Nonparametric Hedonic Equilibrium Model with Unobserved Quality," Working Papers 201914, University of California at Riverside, Department of Economics.
    • Handle: RePEc:ucr:wpaper:201914
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    File URL: https://economics.ucr.edu/repec/ucr/wpaper/201914.pdf
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    More about this item

    Keywords

    hedonic equilibrium; unobserved quality; distributional effects; nonparametric identification; series estimation;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J7 - Labor and Demographic Economics - - Labor Discrimination

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