Identi?cation and estimation of dynamic structural models with unobserved choices

Yingyao Hu and Yi Xin
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Yi Xin: Institute for Fiscal Studies

No CWP35/19, CeMMAP working papers from Centre for Microdata Methods and Practice, Institute for Fiscal Studies

Abstract: This paper develops identi?cation and estimation methods for dynamic structural models when agents’ actions are unobserved by econometricians. We provide conditions under which choice probabilities and latent state transition rules are nonparametrically identi?ed with a continuous state variable in a single-agent dynamic discrete choice model. Our identi?cation results extend to (1) models with serially correlated unobserved heterogeneity and continuous choices, (2) cases in which only discrete state variables are available, and (3) dynamic discrete games. We apply our method to study moral hazard problems in US gubernatorial elections. We ?nd that the probabilities of shirking increase as the governors approach the end of their terms.

Date: 2019-06-18
New Economics Papers: this item is included in nep-dcm and nep-ecm
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