Essays in Econometrics with Applications

Abstract

This thesis presents three essays in econometrics with applications. The common denominator in the three essays is that of modeling heterogeneity in the observed data. Chapter 1 offers a general introduction to the thesis to motivate the research, as well as provide some background knowledge on the theoretical foundations of the models used in subsequent chapters. In particular, Chapter 2 and 3 uses the stochastic frontier model and Chapter 4 uses the life-cycle model. The chapter is concluded by describing how modeling heterogeneity is relevant to both models.

In Chapter 2 and 3, the perspective with which we model heterogeneity is from the point of view of the Econometrician. In particular, the objective is to model heterogeneity by uncovering the latent group structures that are unobserved by the Econometrician. Modeling heterogeneity by clustering entities into groups is appealing from statistical point of view, as it allows us to mitigate over-fitting issues and specify a parsimonious model.

In Chapter 4, we take a slightly different perspective to modeling heterogeneity, taking the point of view of an economic agent in a structural model. In particular, we let agents in the structural model face uncertainty about their latent type that they belong to. Knowledge of type matters for agents as they are struck by shocks that depend on their type, ultimately influencing their life-cycle decisions. We let agents learn their type conditional on the history of shocks they receive and study how such learning about type influence their life-cycle profiles.

The general conclusion of the thesis is presented in Chapter 5. Show more