Estimation of Dynamic Discrete Choice Models by Maximum Likelihood and the Simulated Method of Moments

27 Pages Posted: 29 Apr 2015

See all articles by Philipp Eisenhauer

Philipp Eisenhauer

ZEW – Leibniz Centre for European Economic Research; University of Mannheim - Center for Doctoral Studies in Economics and Management (CDSEM)

James J. Heckman

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); American Bar Foundation; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Stefano Mosso

University of Chicago - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 2015

Abstract

We compare the performance of maximum likelihood (ML) and simulated method of moments (SMM) estimators 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 data set 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 and Heckman, James J. and Mosso, Stefano, Estimation of Dynamic Discrete Choice Models by Maximum Likelihood and the Simulated Method of Moments (May 2015). International Economic Review, Vol. 56, Issue 2, pp. 331-357, 2015. Available at SSRN: https://ssrn.com/abstract=2600296 or http://dx.doi.org/10.1111/iere.12107

Philipp Eisenhauer (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

University of Mannheim - Center for Doctoral Studies in Economics and Management (CDSEM) ( email )

Mannheim, D-68131
Germany

James J. Heckman

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States
773-702-0634 (Phone)
773-702-8490 (Fax)

National Bureau of Economic Research (NBER)

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American Bar Foundation

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Institute for the Study of Labor (IZA)

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Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Stefano Mosso

University of Chicago - Department of Economics ( email )

Graduate School of Business
1101 East 58th Street
Chicago, IL 60637
United States

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