Fast, "robust", and approximately correct : estimating mixed demand systems /
Salanié, Bernard,author.
Wolak, Frank A.,author.
Centre for Economic Policy Research (Great Britain),publisher.
Many econometric models used in applied work integrate over unobserved heterogeneity. We show that a class of these models that includes many random coefficients demand systems can be approximated by a "small-sigma" expansion that yields a straightforward 2SLS estimator. We study in detail the models of market shares popular in empirical IO ("macro BLP"). Our estimator is only approximately correct, but it performs very well in practice. It is extremely fast and easy to implement, and it accommodates to misspecifications in the higher moments of the distribution of the random coefficients. At the very least, it provides excellent starting values for more commonly used estimators of these models.
Description based on online resource; title from http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=13236 viewed October 10, 2018.
"Published 10 October 2018"
"Submitted 09 October 2018"
Includes bibliographical references (pages 38-39).
Many econometric models used in applied work integrate over unobserved heterogeneity. We show that a class of these models that includes many random coefficients demand systems can be approximated by a "small-sigma" expansion that yields a straightforward 2SLS estimator. We study in detail the models of market shares popular in empirical IO ("macro BLP"). Our estimator is only approximately correct, but it performs very well in practice. It is extremely fast and easy to implement, and it accommodates to misspecifications in the higher moments of the distribution of the random coefficients. At the very least, it provides excellent starting values for more commonly used estimators of these models.
Instrumental variables (Statistics)
Econometric models.
Economics
Econometric models.
Economics