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18
Mobility and the return to education: Testing a Roy Model with multiple markets
 ECONOMETRICA
, 2002
"... Selfselected migration presents one potential explanation for why observed returns to a college education in local labor markets vary widely even though U.S. workers are highly mobile. To assess the impact of selfselection on estimated returns, this paper first develops a Roy model of mobility and ..."
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Cited by 183 (0 self)
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Selfselected migration presents one potential explanation for why observed returns to a college education in local labor markets vary widely even though U.S. workers are highly mobile. To assess the impact of selfselection on estimated returns, this paper first develops a Roy model of mobility and earnings where workers choose in which of the 50 states (plus the District of Columbia) to live and work. Available estimation methods are either infeasible for a selection model with so many alternatives or place potentially severe restrictions on earnings and the selection process. This paper develops an alternative econometric methodology which combines Lee's (1983) parametric maximum order statistic approach to reduce the dimensionality of the error terms with more recent work on semiparametric estimation of selection models (e.g., Ahn and Powell, 1993). The resulting semiparametric correction is easy to implement and can be adapted to a variety of other polychotomous choice problems. The empirical work, which uses 1990 U.S. Census data, confirms the role of comparative advantage in mobility decisions. The results suggest that selfselection of higher educated individuals to states with higher returns to education generally leads to upward biases in OLS estimates of the returns to education in statespecific labor markets. While the estimated returns to a college education are significantly biased, correcting for the bias does not narrow the range of returns across states. Consistent with the finding that the corrected return to a college education differs across the U.S., the relative statetostate migration flows of college versus high schooleducated individuals respond strongly to differences in the return to education and amenities across states.
Semiparametric estimation of multinomial discretechoice models using a subset of choices
 RAND JOURNAL OF ECONOMICS
, 2007
"... ..."
2009): Identifying Heterogeneity in Economic Choice Models, Discussion paper
"... We show how to nonparametrically identify the distribution that characterizes heterogeneity among agents in a general class of structural choice models. We introduce an axiom that we term separability and prove that separability of a structural model ensures identification. The main strength of sepa ..."
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Cited by 15 (1 self)
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We show how to nonparametrically identify the distribution that characterizes heterogeneity among agents in a general class of structural choice models. We introduce an axiom that we term separability and prove that separability of a structural model ensures identification. The main strength of separability is that it makes verifying the identification of nonadditive models a tractable task because it is a condition that is stated directly in terms of the choice behavior of agents in the model. We use separability to prove several new results. We prove the identification of the distribution of random functions and marginal effects in a nonadditive regression model. We also identify the distribution of utility functions in the multinomial choice model. Finally, we extend 2SLS to have random functions in both the first and second stages. This instrumental variables strategy applies equally to multinomial choice models with endogeneity.
Nonparametric Identification and Estimation of Random Coefficients in Nonlinear Economic Models
, 2010
"... We show how to nonparametrically identify and estimate the distribution of random coefficients that characterizes the heterogeneity among agents in a general class of economic choice models. We introduce an axiom that we term separability and prove that separability of a structural model ensures ide ..."
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Cited by 12 (4 self)
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We show how to nonparametrically identify and estimate the distribution of random coefficients that characterizes the heterogeneity among agents in a general class of economic choice models. We introduce an axiom that we term separability and prove that separability of a structural model ensures identification. Identification naturally gives rise to a nonparametric minimum distance estimator. We prove identification of distributions of utility functions in multinomial choice, distributions of labor supply responses to tax changes, and distributions of wage functions in the Roy selection model. We also reconsider the problem of endogeneity in economic choice models, leading to new results on the twostage least squares model.
Estimation of the Binary Response Model using a Mixture of Distributions Estimator (MOD)
, 2000
"... This paper develops a semiparametric sieve estimator, which is termed a mixture of distributions estimator (MOD), to estimate a binary response model when the distribution of the errors is unknown. The estimator for the distribution function is composed of a mixture of smooth distributions, where th ..."
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Cited by 10 (0 self)
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This paper develops a semiparametric sieve estimator, which is termed a mixture of distributions estimator (MOD), to estimate a binary response model when the distribution of the errors is unknown. The estimator for the distribution function is composed of a mixture of smooth distributions, where the number of mixtures increases with the sample size. The model is semiparametric because it is assumed that a parametric index type restriction holds. Optimal rates of convergence are established for the distribution function under the L_2 norm, and conditions are derived under which estimates of the parametric component are asymptotically normal. An appealing feature about MOD is that it is possible to restrict the estimator of the distribution function, a priori, to be smooth, nonnegative, increasing, and to integrate to one. This has important practical and theoretical implications.
Identifying Heterogeneity in Economic Choice and Selection Models Using Mixtures, working paper
, 2009
"... We show how to nonparametrically identify the distribution of heterogeneity in a general class of structural economic choice models. We state an economic property known as reducibility and prove that reducibility ensures identification. Reducibility makes verifying the identification of nonlinear mo ..."
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Cited by 8 (1 self)
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We show how to nonparametrically identify the distribution of heterogeneity in a general class of structural economic choice models. We state an economic property known as reducibility and prove that reducibility ensures identification. Reducibility makes verifying the identification of nonlinear models a straightforward task because it is a condition that is stated directly in terms of a choice model. We can allow for a nonparametric distribution over nonparametric functions of the data. We use our framework to prove identification in three classes of economic models: 1) nonparametric regressions including with endogenous regressors, 2) multinomial discrete choice including endogenous regressors as well as multiple purchases with complementarities, and 3) selection and mixed continuousdiscrete choice. Our identification strategy avoids identification at infinity. For selection, we allow for essential heterogeneity in both the selection and outcome equations and fully identify the joint distribution of outcomes.
Margins of Multinational Labor Substitution ∗
, 2009
"... Employment at a multinational enterprise (MNE) responds to wages at the extensive margin, when an MNE enters a foreign location, and at the intensive margin, when an MNE operates existing affiliates. We present an MNE model and conditions for parametric and nonparametric identification. Prior studie ..."
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Cited by 7 (2 self)
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Employment at a multinational enterprise (MNE) responds to wages at the extensive margin, when an MNE enters a foreign location, and at the intensive margin, when an MNE operates existing affiliates. We present an MNE model and conditions for parametric and nonparametric identification. Prior studies rarely found wages to affect MNE employment. Our integrated approach documents salient labor substitution for German manufacturing MNEs and removes bias. In Central and Eastern Europe, most employment responds at the extensive margin, while in Western Europe the extensive margin accounts for around twothirds of employment shifts. At distant locations, MNEs respond to wages only at the extensive margin.
Moment Inequalities for Multinomial Choice with Fixed Effects
, 2014
"... We propose a new approach to the semiparametric analysis of multinomial choice models with fixed effects and a group (or panel) structure. A traditional random utility framework is employed, and the key assumption is a group homogeneity condition on the disturbances. This assumption places no restri ..."
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We propose a new approach to the semiparametric analysis of multinomial choice models with fixed effects and a group (or panel) structure. A traditional random utility framework is employed, and the key assumption is a group homogeneity condition on the disturbances. This assumption places no restrictions on either the joint distribution of the disturbances across choices or their within group (or across time) correlations. This work follows a substantial nonlinear panel literature (Manski 1987, Honore 1992, Abrevaya 1999, 2000) with the distinction that multiple covariate index functions now determine the outcome. A novel withingroup comparison leads to a set of conditional moment inequalities that provide partial identifying information about the parameters of the observed covariate index functions, while avoiding the incidental parameter problem. We extend our framework to allow for: certain types of endogenous regressors (including lagged dependent variables and conditional heteroskedasticity), setvalued covariates, and parametric distributional information on disturbances. 1 1