The Identification and Economic Content of Ordered Choice Models with Stochastic Thresholds
This paper extends the widely used ordered choice model by introducing stochastic thresholds and interval-specific outcomes. The model can be interpreted as a generalization of the GAFT (MPH) framework for discrete duration data that jointly models durations and outcomes associated with different stopping times. We establish conditions for nonparametric identification. We interpret the ordered choice model as a special case of a general discrete choice model and as a special case of a dynamic discrete choice model.
Earlier versions of this paper circulated as part of "Dynamic Treatment Effects'' (Heckman and Navarro, 2004) and "Dynamic Discrete Choice and Dynamic Treatment Effects'' (Heckman and Navarro, 2005, published 2007). This research was supported by NIH R01-HD043411 and NSF SES-024158. Cunha acknowledges support from the Claudio Haddad Dissertation Fund at the University of Chicago. The views expressed in this paper are those of the authors and not necessarily those of the funders listed here. Versions of this paper were presented at the UCLA Conference on Panel Data in April 2004; at the Econometrics Study Group, UCL, in London in June 2004; at econometrics seminars at the University of Toulouse in November 2004 and at Northwestern University in April 2005; and at the Festschrift in honor of Daniel McFadden at the University of California at Berkeley in May 2005. Jeremy Fox, Han Hong, Rosa Matzkin, and Aureo de Paula provided useful comments on previous versions. We benefited from comments received at the University of Chicago econometrics workshop in May 2007, especially those from Victor Chernozhukov and Lars Hansen. We also thank two anonymous referees who made helpful comments on the penultimate draft as well as Fei He, John Trujillo, and Jordan Weil who checked the notation. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
THE IDENTIFICATION AND ECONOMIC CONTENT OF ORDERED CHOICE MODELS WITH STOCHASTIC THRESHOLDS† Flavio Cunha, James J. Heckman, Salvador Navarro‡ Article first published online: 11 DEC 2007 DOI: 10.1111/j.1468-2354.2007.00462.x International Economic Review Volume 48, Issue 4, pages 1273–1309, November 2007