Varying random coefficient models

DOI10.1016/J.JECONOM.2020.04.049zbMATH Open1471.62520arXiv1804.03110OpenAlexW3048057617MaRDI QIDQ2658751FDOQ2658751

Christoph Breunig

Publication date: 24 March 2021

Published in: Journal of Econometrics (Search for Journal in Brave)

Abstract: This paper provides a new methodology to analyze unobserved heterogeneity when observed characteristics are modeled nonlinearly. The proposed model builds on varying random coefficients (VRC) that are determined by nonlinear functions of observed regressors and additively separable unobservables. This paper proposes a novel estimator of the VRC density based on weighted sieve minimum distance. The main example of sieve bases are Hermite functions which yield a numerically stable estimation procedure. This paper shows inference results that go beyond what has been shown in ordinary RC models. We provide in each case rates of convergence and also establish pointwise limit theory of linear functionals, where a prominent example is the density of potential outcomes. In addition, a multiplier bootstrap procedure is proposed to construct uniform confidence bands. A Monte Carlo study examines finite sample properties of the estimator and shows that it performs well even when the regressors associated to RC are far from being heavy tailed. Finally, the methodology is applied to analyze heterogeneity in income elasticity of demand for housing.

Full work available at URL: https://arxiv.org/abs/1804.03110

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zbMATH Keywords

rate of convergenceHermite functionsrandom coefficientssieve minimum distancevarying coefficientsbootstrap uniform confidence bands

Mathematics Subject Classification ID

Density estimation (62G07) Nonparametric regression and quantile regression (62G08) Asymptotic properties of nonparametric inference (62G20) Applications of statistics to economics (62P20)

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Cited In (4)

• Generalized linear random effects models with varying coefficients
• Fornasini-Marchesini's models with variable coefficients
• A model for variables with suddenly changing parameters
• Title not available (Why is that?)

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