PanelDataNotes-22

PanelDataNotes-22 - Econometric Analysis of Panel Data...

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Unformatted text preview: Econometric Analysis of Panel Data William Greene Department of Economics Stern School of Business Econometric Analysis of Panel Data 22. Individual Heterogeneity and Random Parameter Variation Heterogeneity O bservational: Observable differences across individuals (e.g., choice makers) C hoice strategy: How consumers make decisions – the underlying behavior S tructural: Differences in model frameworks P references: Differences in model ‘parameters’ Parameter Heterogeneity i,t it it i,t (1) Regression model y ε (2) Conditional probability or other nonlinear model f(y | x , ) (3) Heterogeneity - how are parameters distributed across individuals? (a) Discr ′ = + i,t i i x β β ete - the population contains a mixture of Q types of individuals. (b) Continuous. Parameters are part of the stochastic structure of the population. Distinguish Bayes and Classical Both depart from the heterogeneous ‘model,’ f(y it | x it )=g(y it , x it , β i ) What do we mean by ‘randomness’ With respect to the information of the analyst (Bayesian) With respect to some stochastic process governing ‘nature’ (Classical) Bayesian: No difference between ‘fixed’ and ‘random’ Classical: Full specification of joint distributions for observed random variables; piecemeal definitions of ‘random’ parameters. Usually a form of ‘random effects’ Hierarchical Bayesian Estimation i,t i,t Sample data generation: f(y | ) g(y , ) Individual heterogeneity: , ~ N[ ] What information exists about 'the model?' p( ) = N[ , ] ′ = + i,t i,t i i i i x , x , β Ω = u u 0, β β Γ Prior densities for structural parameters : β β Σ , e.g., and (large) v p( ) = Inverse Wishart[ , ] p( ) = whatever works for other parameters in model p( )= N[ , ] End Result: Joint prior distribution for all param γ i I A Γ Ω Priors for parameters of interest : β β Γ eters p( , , , |prior 'beliefs' in , , , assumed densities) γ i A, β Γ Ω β β Σ Allenby and Rossi: Structure it,j it,j it,j it,j Conditional data generation mechanism y * = + , Utility for consumer i, choice t, ε brand j. (Consumer choice among brands of ketchup - the 'scanner data') Y = 1[y * = maximum utility among i it, j x β it,j it,j j 1 the J choices] x = (constant, log price, "availability," "featured") ~ N[0, ], = 1 ε λ λ Implies a J outcome multinomial probit model. Priors i i i i β j j j β-1 β Prior Densities ~N[ , ], Implies = + , ~N[0, ] ~Inverse Gamma[v,s ] (looks like c λ hi-squared), v=3, s =1 Priors over structural model parameters ~N[ ,a ], =0 β V β β w w V β β V β β β V ~Wishart[v , ],v =8, =8 V V I Bayesian Posterior Analysis...
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This note was uploaded on 01/05/2012 for the course B 55.9912 taught by Professor Willamgreene during the Fall '11 term at NYU.

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PanelDataNotes-22 - Econometric Analysis of Panel Data...

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