NATIONAL BUREAU OF ECONOMIC RESEARCH
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Identification of Counterfactuals in Dynamic Discrete Choice Models

Myrto Kalouptsidi, Paul T. Scott, Eduardo Souza-Rodrigues

NBER Working Paper No. 21527
Issued in September 2015, Revised in February 2020
NBER Program(s):Environment and Energy Economics, Health Economics, Industrial Organization, Labor Studies

Dynamic discrete choice (DDC) models are not identified nonparametrically, but the non-identification of models does not necessarily imply the non-identification of counterfactuals. We derive novel results for the identification of counterfactuals in DDC models, such as non- additive changes in payoffs or changes to agents' choice sets. In doing so, we propose a general framework that allows the investigation of the identification of a broad class of counterfactuals (covering virtually any counterfactual encountered in applied work). To illustrate the results, we consider a firm entry/exit problem numerically, as well as an empirical model of agricultural land use. In each case, we provide examples of both identified and non-identified counterfactuals of interest.

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Document Object Identifier (DOI): 10.3386/w21527

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