Working Paper: NBER ID: w3343
Authors: Axel Boersch-Supan; Vassilis Hajivassiliou; Laurence J. Kotlikoff; John N. Morris
Abstract: This paper develops a general multiperiod-multinomial probit model for panel data to estimate the living arrangements of the elderly. The model has the following features:
(a) In each period choices do not necessarily obey the assumption of independence of irrelevant alternatives.
(b) Unobserved person-specific attributes are treated as random effects. These random effects may also be correlated across alternatives.
(c) In addition, unobserved choice-specific utility components may persist over some time, creating an autoregressive and/or heteroscedastic error structure.
The model is estimated by simulating the choice probabilities in the likelihood function. We examine several variants of the specification of the correlation structure and investigate the extent the biases created by ignoring intertemporal correlations.
Keywords: Elderly; Living Arrangements; Multinomial Probit Model; Unobserved Heterogeneity; Autocorrelated Errors
JEL Codes: J14; C25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| unobserved person-specific attributes (D80) | living arrangements (R21) |
| living with children (J13) | living arrangements (R21) |
| unobserved heterogeneity (C21) | correlated choices among living arrangements (R21) |
| failing to account for intertemporal correlations (D15) | biased estimated effects of living arrangements (J12) |