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Estimating Heterogeneous Effects: Applications to Labor Economics

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  • Stephane Bonhomme
  • Angela Denis

Abstract

A growing number of applications involve settings where, in order to infer heterogeneous effects, a researcher compares various units. Examples of research designs include children moving between different neighborhoods, workers moving between firms, patients migrating from one city to another, and banks offering loans to different firms. We present a unified framework for these settings, based on a linear model with normal random coefficients and normal errors. Using the model, we discuss how to recover the mean and dispersion of effects, other features of their distribution, and to construct predictors of the effects. We provide moment conditions on the model's parameters, and outline various estimation strategies. A main objective of the paper is to clarify some of the underlying assumptions by highlighting their economic content, and to discuss and inform some of the key practical choices.

Suggested Citation

  • Stephane Bonhomme & Angela Denis, 2024. "Estimating Heterogeneous Effects: Applications to Labor Economics," Papers 2404.01495, arXiv.org.
    • Handle: RePEc:arx:papers:2404.01495
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    References listed on IDEAS

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    Cited by:

    1. Christopher Walters, 2024. "Empirical Bayes Methods in Labor Economics," RF Berlin - CReAM Discussion Paper Series 2422, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).

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    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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