NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Identification and Estimation of 'Irregular' Correlated Random Coefficient Models

Bryan S. Graham, James Powell

NBER Working Paper No. 14469
Issued in November 2008
NBER Program(s):   HE   LS   PE   TWP

In this paper we study identification and estimation of a correlated random coefficients (CRC) panel data model. The outcome of interest varies linearly with a vector of endogenous regressors. The coefficients on these regressors are heterogenous across units and may covary with them. We consider the average partial effect (APE) of a small change in the regressor vector on the outcome (cf., Chamberlain, 1984; Wooldridge, 2005a). Chamberlain (1992) calculates the semiparametric efficiency bound for the APE in our model and proposes a √N consistent estimator. Nonsingularity of the APE’s information bound, and hence the appropriateness of Chamberlain’s (1992) estimator, requires (i) the time dimension of the panel (T) to strictly exceed the number of random coefficients (p) and (ii) strong conditions on the time series properties of the regressor vector. We demonstrate irregular identification of the APE when T = p and for more persistent regressor processes. Our approach exploits the different identifying information in the subpopulations of ‘stayers’ — or units whose regressor values change little across periods — and ‘movers’ — or units whose regressor values change substantially across periods. We propose a feasible estimator based on our identification result and characterize its large sample properties. While irregularity precludes our estimator from attaining parametric rates of convergence, it limiting distribution is normal and inference is straightforward to conduct. Standard software may be used to compute point estimates and standard errors. We use our methods to estimate the average elasticity of calorie consumption with respect to total outlay for a sample of poor Nicaraguan households.

download in pdf format
   (613 K)

email paper

The NBER Bulletin on Aging and Health provides summaries of publications like this.  You can sign up to receive the NBER Bulletin on Aging and Health by email.

This paper is available as PDF (613 K) or via email.

This paper was revised on December 5, 2011

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w14469

Published: Identification and Estimation of Average Partial Effects in “Irregular” Correlated Random Coefficient Panel Data Models Bryan S. Graham1, James L. Powell2,† Article first published online: 25 SEP 2012 DOI: 10.3982/ECTA8220 © 2012 The Econometric Society Issue Econometrica Econometrica Volume 80, Issue 5, pages 2105–2152, September 2012

Users who downloaded this paper also downloaded these:
Heckman, Schmierer, and Urzua w15463 Testing the Correlated Random Coefficient Model
Bajari, Fox, Kim, and Ryan w15210 A Simple Nonparametric Estimator for the Distribution of Random Coefficients
Chamberlain w0913 Panel Data
Knittel and Metaxoglou w14080 Estimation of Random Coefficient Demand Models: Challenges, Difficulties and Warnings
Graham, Imbens, and Ridder w16499 Measuring the Effects of Segregation in the Presence of Social Spillovers: A Nonparametric Approach
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us