Research towards a better understanding of logit type models with fixed effects

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Many activities exhibit persistence. For example, individuals tend to choose the same insurance plan year after year, a firm that exports to a particular country one year might be more likely to export to that country the next year, and a smoker is more likely to smoke in the future than a-non-smoker. Two natural explanations for such persistence are that the event itself causes the event to be more likely in the future, or that there are persistent characteristics of the person or firm which lead to persistence in the activity. These two explanations can have very different policy implications. This project will investigate when it is possible to distinguish between the two explanations and to develop tools for doing so. The research will be mainly theoretical, but it will also develop practical tools for implementing the methods that will be developed. The results of this research project will aid in making informed and appropriate policy and business decisions, thus improving the functioning of the economy. The results will therefore increase the performance of the US economy.This project will investigate identification and estimation of a variety of discrete outcome panel data models with fixed effects when the panel data set consists of a small number of time periods for each individual. A recent paper co-authored by the PI developed an approach for searching for moment conditions in simple dynamic, binary-outcome logit models. This project will apply the same general approach to construct moment conditions for a number of other models. In the cases where it is possible to construct such moment conditions, these will be used to construct an estimator and tests of the model parameters. The results of this research project will aid in making informed and appropriate policy and business decisions, thus improving the functioning of the economy. The results will therefore increase the performance of the US economy.This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.