Estimating Intertemporal Allocation Parameters using Synthetic Residual Estimation

• 成果类型: Article
• 署名作者: Alan, Sule; Browning, Martin
• 署名单位: University of Cambridge; University of Oxford
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1111/j.1467-937X.2010.00607.x
• 发表日期: 2010
• 页码: 1231-1261
• 关键词: permanent-income hypothesis; discount rate heterogeneity; panel-data models; market participation; risk attitudes; consumption; WEALTH; HEALTH; retirement; elasticity

摘要

We present a novel structural estimation procedure for models of intertemporal allocation. This is based on modelling expectations errors directly; we refer to it as synthetic residual estimation (SRE). The flexibility of SRE allows us to account for measurement error in consumption and for heterogeneity in intertemporal allocation parameters. An investigation of the small sample properties of the SRE estimator indicates that it dominates generalized method of moments (GMM) estimation of both exact and approximate Euler equations in the case when we have short panels and noisy consumption data. We apply SRE to two panels drawn from the Panel Study of Income Dynamics (PSID) and estimate the joint distribution of the discount factor and the elasticity of intertemporal substitution. We reject strongly homogeneity of the discount factor and the elasticity of intertemporal substitution. We find that, on average, the more educated are more patient and less willing to substitute intertemporally than the less educated. Within education strata, patience and willingness to substitute are positively correlated.