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Federal Reserve Bank of St. Louis
Working Papers
Estimation of Dynastic Life-Cycle Discrete Choice Models
George-Levi Gayle
Limor Golan
Mehmet A. Soytas
Abstract

This paper explores the estimation of a class of life-cycle discrete choice intergenerational models. It proposes a new semiparametric estimator. It shows that it is root-N-consistent and asymptotically normally distributed. We compare our estimator with a modified version of the full solution maximum likelihood estimator (MLE) in a Monte Carlo study. Our estimator performs comparably to the MLE in a finite sample but greatly reduces the computational cost. The paper documents that the quantity-quality trade-offs depend on the household composition and specialization in the household. Using the proposed estimator, we estimate a dynastic model that rationalizes these observed patterns.


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George-Levi Gayle & Limor Golan & Mehmet A. Soytas, Estimation of Dynastic Life-Cycle Discrete Choice Models, Federal Reserve Bank of St. Louis, Working Papers 2015-20, 13 Aug 2015.
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