DP14298 The Informativeness of Estimation Moments

Author(s): Áureo De Paula
Publication Date: January 2020
Keyword(s): externalities, GMM, Ordered Models, Parameter Sensitivity, retirement
JEL(s): C01, C13, C35, J32
Programme Areas: Public Economics, Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14298

This paper introduces measures for how each moment contributes to the precision of parameter estimates in GMM settings. For example, one of the measures asks what would happen to the variance of the parameter estimates if a particular moment was dropped from the estimation. The measures are all easy to compute. We illustrate the usefulness of the measures through two simple examples as well as an application to a model of joint retirement planning of couples. We estimate the model using the UK-BHPS, and we find evidence of complementarities in leisure. Our sensitivity measures illustrate that the estimate of the complementarity is primarily informed by the distribution of differences in planned retirement dates. The estimated econometric model can be interpreted as a bivariate ordered choice model that allows for simultaneity. This makes the model potentially useful in other applications.