Arbeitspapier

Posterior average effects

Economists are often interested in estimating averages with respect to distributions of unobservables, such as moments of individual fixed-effects, or average partial effects in discrete choice models. For such quantities, we propose and study posterior average effects (PAE), where the average is computed conditional on the sample, in the spirit of empirical Bayes and shrinkage methods. While the usefulness of shrinkage for prediction is well-understood, a justification of posterior conditioning to estimate population averages is currently lacking. We show that PAE have minimum worst-case specification error under various forms of misspecification of the parametric distribution of unobservables. In addition, we introduce a measure of informativeness of the posterior conditioning, which quantifies the worst-case specification error of PAE relative to parametric model-based estimators. As illustrations, we report PAE estimates of distributions of neighborhood effects in the US, and of permanent and transitory components in a model of income dynamics.

Language
Englisch

Bibliographic citation
Series: cemmap working paper ; No. CWP36/21

Classification
Wirtschaft
Estimation: General
Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
Subject
model misspecification
robustness
sensitivity analysis
empirical Bayes
posterior conditioning
latent variables

Event
Geistige Schöpfung
(who)
Bonhomme, Stéphane
Weidner, Martin
Event
Veröffentlichung
(who)
Centre for Microdata Methods and Practice (cemmap)
(where)
London
(when)
2021

DOI
doi:10.47004/wp.cem.2021.3621
Handle
Last update
20.09.2024, 8:22 AM CEST

Data provider

This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.

Object type

  • Arbeitspapier

Associated

  • Bonhomme, Stéphane
  • Weidner, Martin
  • Centre for Microdata Methods and Practice (cemmap)

Time of origin

  • 2021

Other Objects (12)