Working Paper: NBER ID: w21893
Authors: Ariel Pakes; Jack Porter
Abstract: We propose a new approach to 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 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 within-group 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), set-valued covariates, and parametric distributional information on disturbances.
Keywords: semiparametric analysis; multinomial choice models; fixed effects; conditional moment inequalities
JEL Codes: C14; C23; C25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| differences in outcome distributions from two within-group observations (C46) | differences in the index functions associated with each observation (C43) |
| larger index function difference (C43) | more likely to be observed choice (D01) |
| semiparametric approach (C51) | circumvents incidental parameter problem (C36) |
| derived inequalities (C29) | inference on the parameters of interest (C20) |