Identification and Estimation of Categorical Random Coeficient Models
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Authors
Gao, Z.
Pesaran, M. H.
Publication Date
2022-04-14Series
Cambridge Working Papers in Economics
Publisher
Faculty of Economics, University of Cambridge
Type
Working Paper
Metadata
Show full item recordCitation
Gao, Z., & Pesaran, M. H. (2022). Identification and Estimation of Categorical Random Coeficient Models. https://doi.org/10.17863/CAM.83975
Abstract
This paper proposes a linear categorical random coefficient model, in which the random coefficients follow parametric categorical distributions. The distributional parameters are identified based on a linear recurrence structure of moments of the random coefficients. A Generalized Method of Moments estimator is proposed, and its finite sample properties are examined using Monte Carlo simulations. The utility of the proposed method is illustrated by estimating the distribution of returns to education in the U.S. by gender and educational levels. We find that rising heterogeneity between educational groups is mainly due to the increasing returns to education for those with postsecondary education, whereas within group heterogeneity has been rising mostly in the case of individuals with high school or less education.
Keywords
Random coefficient models, categorical distribution, return to education
Identifiers
CWPE2228
This record's DOI: https://doi.org/10.17863/CAM.83975
This record's URL: https://www.repository.cam.ac.uk/handle/1810/336554
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