A1468
Title: Estimating choice models with piecewise smooth objective functions: Application to joint retirement
Authors: Siqi Wei - IE University (Spain) [presenting]
Tatiana Rosa - CAF (Uruguay)
Abstract: Choice models with piecewise smooth objective functions are studied. By introducing well-defined latent variables derived from regional components (auxiliary functions), conditions are provided under which the choice model can be transformed into a reduced form resembling tobit-like models, with the introduced latent variables as potential outcomes. The potential outcome framework not only serves as an alternative solution method for the choice model, but also facilitates the implementation of the stochastic expectation-maximization (SEM) algorithm to obtain MLE. The framework is illustrated using two simple examples: 1) responses to tax and transfers, and 2) the (S,s) model. A joint retirement decision model among European couples based on the interdependent duration model is further empirically estimated, applying the proposed solution and estimation methods. The results provide empirical evidence of complementarity between spouses in their transition out of the labor force in Europe.
