NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Robert M. Sauer

Royal Holloway College, University of London
Egham, Surrey TW20 0EX
United Kingdom

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NBER Working Papers and Publications

August 2017Indirect Inference with Importance Sampling: An Application to Women’s Wage Growth
with Christopher R. Taber: w23669
This paper has two main parts. In the first, we describe a method that smooths the objective function in a general class of indirect inference models. Our smoothing procedure makes use of importance sampling weights in estimation of the auxiliary model on simulated data. The importance sampling weights are constructed from likelihood contributions implied by the structural model. Since this approach does not require transformations of endogenous variables in the structural model, we avoid the potential approximation errors that may arise in other smoothing approaches for indirect inference. We show that our alternative smoothing method yields consistent estimates. The second part of the paper applies the method to estimating the effect of women’s fertility on their human capital accumulati...
 
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