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Research Seminar Series in Statistics and Mathematics

Wirtschaftsuniversität Wien, Departments 4 D4.4.00809:00 - 10:30

Type Lecture / discussion
SpeakerRémi Piatek (Department of Economics, University of Copenhagen)
Organizer Institut für Statistik und Mathematik

Rémi Piatek (Department of Economics, University of Copenhagen) about "A multinomial probit model with latent factors, with an application to the study of inequality in educational attainment"

The Institute for Statistics and Mathematics (Department of Finance, Accounting and Statistics) cordially invites everyone interested to attend the talks in our Research Seminar Series, where internationally renowned scholars from leading universities present and discuss their (working) papers.

The list of talks for the winter term 2018/19 is available via the following link:

We develop a parametrization of the multinomial probit model that yields greater insight into the underlying decision-making process, by decomposing the error terms of the utilities into a small set of latent factors. The latent factors are identified without a measurement system, and they can be meaningfully linked to an economic model. We provide sufficient conditions that make this structure identifiable and interpretable. For inference, we design a Markov chain Monte Carlo sampler based on marginal data augmentation. A simulation exercise shows the good numerical performance of our sampler and reveals the practical importance of alternative identification restrictions. Our approach can generally be applied to any setting where researchers can specify an a priori structure on a few drivers of unobserved heterogeneity.
We apply this framework to bring a fresh perspective to inequality in educational attainment, suggesting occupational sorting as an unexplored channel that may depress education outcomes in children from less advantaged families, in addition to established considerations such as school readiness and financing constraints. To study this channel, education and occupation choices are analyzed jointly, whereas existing research usually treats them as separate. We therefore develop a model of educational choice in which the formation of wage expectations accounts for anticipated occupational choices. For our empirical application, we use a 5% representative sample of US high schoolers to determine the impact of multiple cognitive and non-cognitive skills on occupational choice, relative to parental background.

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