Quantitative Economics
Journal Of The Econometric Society
Edited by: Stéphane Bonhomme • Print ISSN: 1759-7323 • Online ISSN: 1759-7331
Edited by: Stéphane Bonhomme • Print ISSN: 1759-7323 • Online ISSN: 1759-7331
Quantitative Economics: Jan, 2019, Volume 10, Issue 1
Federico A. Bugni, Takuya Ura
Single‐agent dynamic discrete choice models are typically estimated using heavily parametrized econometric frameworks, making them susceptible to model misspecification. This paper investigates how misspecification affects the results of inference in these models. Specifically, we consider a local misspecification framework in which specification errors are assumed to vanish at an arbitrary and unknown rate with the sample size. Relative to global misspecification, the local misspecification analysis has two important advantages. First, it yields tractable and general results. Second, it allows us to focus on parameters with structural interpretation, instead of “pseudo‐true” parameters.We consider a general class of two‐step estimators based on the K‐stage sequential policy function iteration algorithm, where K denotes the number of iterations employed in the estimation. This class includes Hotz and Miller (1993)'s conditional choice probability estimator, Aguirregabiria and Mira (2002)'s pseudo‐likelihood estimator, and Pesendorfer and Schmidt‐Dengler (2008)'s asymptotic least squares estimator.We show that local misspecification can affect the asymptotic distribution and even the rate of convergence of these estimators. In principle, one might expect that the effect of the local misspecification could change with the number of iterations K. One of our main findings is that this is not the case, that is, the effect of local misspecification is invariant to K. In practice, this means that researchers cannot eliminate or even alleviate problems of model misspecification by choosing K.
Single‐agent dynamic discrete choice models estimation inference misspecification local misspecification C13 C61 C73
March 5, 2024
The terms of the Editors of the Econometric Society's three journals end June 30, 2025. We are pleased to announce the incoming Editors and to thank the outgoing Editors for their excellent and continuing service.
Econometrica: Since 2019, Guido Imbens has served as the 14th Editor of Econometrica. On July 1, 2025, Marina Halac will become the Editor.
Quantitative Economics: Stéphane Bonhomme has been the Editor of Quantitative Economics since 2021. His successor will be Bernard Salanié.
Theoretical Economics: The Editor of Theoretical Economics since 2021 has been Simon Board. Taking over for him in July 2025 will be Federico Echenique.
Guido, Stéphane, and Simon have been outstanding Editors. We are grateful to them for the work they have done and will continue to do, and we look forward to further congratulating them next year. We believe Marina, Bernard, and Federico will be outstanding successors and we thank them in advance for their service.
Finally, we are grateful to Larry Samuelson for chairing all three search committees, and we thank the search committee members for their hard and fruitful work:
Econometrica: Christian Dustmann, Lars Hansen, Alessandro Lizzeri, George Mailath, Ariel Pakes, Helene Rey, and Elie Tamer.
QE: Kate Ho, Michael Keane, Felix Kubler, Whitney Newey, and Frank Schorfheide.
TE: Jeff Ely, Johannes Horner, Gilat Levy, Meg Meyer, and Ran Spiegler.