Bounds on Average Effects in Discrete Choice Panel Data Models

Abstract

In discrete choice panel data, estimation of average effects is crucial for quantifying the effect of covariates, and for policy evaluation and counterfactual analysis. However, in short panels with individual-specific effects, challenges arise due to partial identification and the incidental parameter problem. In particular, estimating the sharp identified set on average effects becomes impractical when covariates have large support sets, such as when they are continuous. This paper proposes a method for estimating outer bounds on the identified set of average effects, which are easy to construct, converge at the parametric rate, and remain computationally feasible even for moderately large samples. Asymptotically valid confidence intervals are also provided.