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Structural Modeling June 8, 2007

Posted by jyu in Qualifying.
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Benifits:

Structural models

1. rely on economic and marketing theories of consumer or firm behavior to derive the econometric specification that can be taken to data

2. based on optimizing behavior of agents

3. allows to test the theories from which the models are derived

4. obtains behavioral predictions that are invariant to the effects of policy changes

Limitations:

1. Most models are only parametrically identified and cannot be estimated using fully nonparametric methods

2. Economic theory often has little to say about the functional form, which is then chosen for reasons of analytical tractability

3. If too much structure is imposed, the models might be less useful for decision making purposes

4. Models often simultaneously exhibit structural and reduced-form components because theory rarely is sufficiently detailed to completely specify a structural model.  Therefore, each model should be judged on its merits – plausibility, interpretability, fit, and predictive validity – for the purpose for which it is formulated.

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Comments»

1. vc - June 8, 2007

good summary – I need more though, nowhere close to 50 per day; barely any!

2. yuchaoyingjoan - June 8, 2007

easy said than done…jyu…

I can’t believe P. Hilton is out of jail after five days…that Beaaa…ch….

Such a screwed justice system….


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