How Well Do Structural Demand Models Work? Counterfactual Predictions in School Choice

77 Pages Posted: 15 Apr 2019

See all articles by Parag A. Pathak

Parag A. Pathak

Massachusetts Institute of Technology (MIT) - Department of Economics

Peng Shi

University of Southern California - Marshall School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: October 4, 2018

Abstract

This paper investigates the prediction accuracy of discrete choice models of school demand, using a policy reform in Boston that altered where applicants can apply under school choice. We find that the discrete choice models do not consistently outperform a much simpler heuristic, but their inconsistent performance largely arises from prediction errors in applicant characteristics, which are auxiliary inputs. Once we condition on the correct inputs, the discrete choice models consistently outperform, and their accuracy does not significantly improve upon refitting using post-reform data, suggesting that the choice models capture stable components of the preference distribution across policy regimes.

Keywords: discrete choice models, counterfactual predictions, simulation, out-of-sample validation, school choice

JEL Classification: C53, C25

Suggested Citation

Pathak, Parag A. and Shi, Peng, How Well Do Structural Demand Models Work? Counterfactual Predictions in School Choice (October 4, 2018). Journal of Econometrics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3356092 or http://dx.doi.org/10.2139/ssrn.3356092

Parag A. Pathak (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-391
Cambridge, MA 02142
United States

Peng Shi

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States

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