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Estimation of dynamic discrete choice models by maximum likelihood and the simulated method of moments

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  • Eisenhauer, Philipp
  • Heckman, James J.

Abstract

We compare the performance of maximum likelihood (ML) and simulated method of moments (SMM) estimation for dynamic discrete choice models. We construct and estimate a simplified dynamic structural model of education that captures some basic features of educational choices in the United States in the 1980s and early 1990s. We use estimates from our model to simulate a synthetic dataset and assess the ability of ML and SMM to recover the model parameters on this sample. We investigate the performance of alternative tuning parameters for SMM.

Suggested Citation

  • Eisenhauer, Philipp & Heckman, James J., 2014. "Estimation of dynamic discrete choice models by maximum likelihood and the simulated method of moments," ZEW Discussion Papers 14-081, ZEW - Leibniz Centre for European Economic Research.
  • Handle: RePEc:zbw:zewdip:14081
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    References listed on IDEAS

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    1. Brant Abbott & Giovanni Gallipoli & Costas Meghir & Giovanni L. Violante, 2019. "Education Policy and Intergenerational Transfers in Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 127(6), pages 2569-2624.

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    More about this item

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education

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