Empirical Methods for Microeconomic Applications

William GreeneDepartment of EconomicsStern School of Business

Lab 5. Random Parameters and Latent Classes

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Commands for Random Parameters

Random Parameter SpecificationsAll models in LIMDEP/NLOGIT may be fit with random parameters,

with panel or cross sections. NLOGIT has more options (not shown here) than the more general cases.

Options for specifications ; FCN = name ( type ), name ( type ), …

Type is N = normal, U = uniform, L = lognormal (positive), T = tent shaped distributions. C = nonrandom (variance = 0 – only in NLOGIT)Name is the name of a variable or parameter in the model or

A_choice for ASCs (up to 8 characters). In the CLOGIT model, they are A_AIR A_TRAIN A_BUS.

; Correlated parameters (otherwise, independent)

ReplicabilityConsecutive runs of the identical model give

different results. Why? Different random draws.

Achieve replicability

(1) Use ;HALTON

(2) Set random number generator before each run with the same value.

CALC ; Ran( large odd number) $ (Setting the seed is not needed for ;Halton)

Random Parameters ModelsSETPANEL ; Group = id ; Pds = ti $PROBIT ; Lhs = doctor

; Rhs = One,age,educ,income,female; RPM ; Pts = 25 ; Halton ; Panel ; Fcn = one(N),educ(N) ; Correlated $

POISSON ; Lhs = Doctor; Rhs =

One,Educ,Age,Income,Hhkids; Fcn = educ(N)

; Panel ; Pts=100 ; Halton; Maxit = 25 $

And so on…

Saving Individual Expected Values

SETPANEL ; Group = id ; Pds = ti $PROBIT ; Lhs = doctor

; Rhs = One,age,educ,income,female; RPM ; Pts = 25 ; Halton ; Panel ; Fcn = one(N),educ(N) ; Correlated

; Parameters$

Commands for Latent Class Models