Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171026
Authors: 
Piatek, Rémi
Gensowski, Miriam
Year of Publication: 
2017
Series/Report no.: 
IZA Discussion Papers 11042
Abstract: 
We develop a parametrization of the multinomial probit model that yields greater insight into the underlying decision-making process, by decomposing the error terms of the utilities into latent factors and noise. The latent factors are identified without a measurement system, and they can be meaningfully linked to an economic model. We provide sufficient conditions that make this structure identified and interpretable. For inference, we design a Markov chain Monte Carlo sampler based on marginal data augmentation. A simulation exercise shows the good numerical performance of our sampler and reveals the practical importance of alternative identification restrictions. Our approach can generally be applied to any setting where researchers can specify an a priori structure on a few drivers of unobserved heterogeneity. One such example is the choice of combinations of two options, which we explore with real data on education and occupation pairs.
Subjects: 
multinomial probit
latent factors
Bayesian analysis
marginal data augmentation
educational choice
occupational choice
JEL: 
C11
C25
C35
Document Type: 
Working Paper

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