Seminar

Inference after discretizing time-varying unobserved heterogeneity

Speaker

Jad Beyhum (KU Leuven)

Date & Time

From: 14 October 2025, 11:30
Until: 14 October 2025, 12:30

Type

Seminar

Venue

UCL, 25 Gordon Street, Maths 500, WC1H 0AY

Abstract: Approximating time-varying unobserved heterogeneity by discrete types has become increasingly popular in economics. Yet, provably valid post-clustering inference for target parameters in models that do not impose an exact group structure is still lacking. This paper fills this gap in the leading case of a linear panel data model with nonseparable two-way unobserved heterogeneity. Building on insights from the double machine learning literature, we propose a simple inference procedure based on a bias-reducing moment. Asymptotic theory and simulations suggest excellent performance. In the application on fiscal policy we revisit, the novel approach yields conclusions in line with economic theory.