ECONOMETRICS: Quasi-Bayes in Latent Variable Models; Dr Sid Kankanala (University of Chicago, Booth)

Abstract:

Latent variable models are widely used to account for unobserved determinants of economic behavior. This paper develops a quasi-Bayes framework to nonparametrically estimate a large class of latent variable models. As an application, we model U.S. earnings from the Panel Study of Income Dynamics (PSID) as the sum of latent permanent and transitory components. Simulations illustrate the favorable performance of quasi-Bayes estimators relative to common alternatives.

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