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Health, children, and elderly living arrangements: a multiperiod-multinomial probit model with unobserved heterogeneity and autocorrelated errors

By Axel Borsch-Supan, Vassilis Hajivassiliou, Laurence J. Kotlikoff and John N. Morris

Abstract

This paper develops a general multiperiod-multinomial probit model for panel data to estimate the living arrangements of the elderly. The model has the following features: (a) In each period choices do not necessarily obey the assumption of independence of irrelevant alternatives. (b) Unobserved person-specific attributes are treated as random effects. These random effects may also be correlated across alternatives. (c) In addition, unobserved choice-specific utility components may persist over some time, creating an autoregressive and/or heteroscedastic error structure. The model is estimated by simulating the choice probabilities in the likelihood function. We examine several variants of the specification of the correlation structure and investigate the extent the biases created by ignoring intertemporal correlations

Topics: HN Social history and conditions. Social problems. Social reform, HB Economic Theory
Publisher: National Bureau for Economic Research
Year: 1990
OAI identifier: oai:eprints.lse.ac.uk:5382
Provided by: LSE Research Online
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