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Testing for State Dependence with Time-Variant Transition Probabilities

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  • Timothy Halliday

Abstract

We derive a simple result that allows us to test for the presence of state dependence in a dynamic Logit model with time-variant transition probabilities and an arbitrary distribution of the unobserved heterogeneity. Monte Carlo evidence suggests that this test has desirable properties even when there are some violations of the model's assumptions. We also consider alternative tests that will have desirable properties only when the transition probabilities do not depend on time and provide evidence that there is an “acceptable” range in which ignoring time-dependence does not matter too much. We conclude with an application to the Barker Hypothesis.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Econometric Reviews.

Volume (Year): 26 (2007)
Issue (Month): 6 ()
Pages: 685-703

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Handle: RePEc:taf:emetrv:v:26:y:2007:i:6:p:685-703

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Related research

Keywords: Dynamic panel data models; Health; State dependence;

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References

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  1. Bo E. Honoré & Ekaterini Kyriazidou, 2000. "Panel Data Discrete Choice Models with Lagged Dependent Variables," Econometrica, Econometric Society, vol. 68(4), pages 839-874, July.
  2. Anne Case & Darren Lubotsky & Christina Paxson, 2002. "Economic status and health in childhood: the origins of the gradient," Working Papers 262, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Health and Wellbeing..
  3. Bo E. Honoré & Elie Tamer, 2006. "Bounds on Parameters in Panel Dynamic Discrete Choice Models," Econometrica, Econometric Society, vol. 74(3), pages 611-629, 05.
  4. Timothy J. Halliday, 2008. "Heterogeneity, state dependence and health," Econometrics Journal, Royal Economic Society, vol. 11(3), pages 499-516, November.
  5. Hahn, Jinyong, 2001. "The Information Bound Of A Dynamic Panel Logit Model With Fixed Effects," Econometric Theory, Cambridge University Press, vol. 17(05), pages 913-932, October.
  6. Thierry Magnac, 2004. "Panel binary variables and sufficiency : generalizing conditional logit," Working Papers 155465, Institut National de la Recherche Agronomique, France.
  7. Bo E. Honoré & Elie Tamer, 2002. "Bounds on Parameters in Dynamic Discrete Choice Models," CAM Working Papers 2004-23, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics, revised Aug 2004.
  8. Timothy J. Halliday, 2007. "Income Risk and Health," Working Papers 200710, University of Hawaii at Manoa, Department of Economics.
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Cited by:
  1. Timothy J Halliday, 2005. "Heterogeneity, State Dependence and Health," Working Papers 200503, University of Hawaii at Manoa, Department of Economics.
  2. Bartolucci, Francesco & Nigro, Valentina & Pigini, Claudia, 2013. "Testing for state dependence in binary panel data with individual covariates," MPRA Paper 48233, University Library of Munich, Germany.
  3. Halliday Timothy, 2011. "Health Inequality over the Life-Cycle," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(3), pages 1-21, October.

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