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Testing for State Dependence with Time-Variant Transition Probabilities

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Author Info
Timothy Halliday

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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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File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/07474930701653768&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
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Publisher Info
Article provided by Taylor and 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 listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Anne Case & Darren Lubotsky & Christina Paxson, 2002. "Economic Status and Health in Childhood: The Origins of the Gradient," American Economic Review, American Economic Association, vol. 92(5), pages 1308-1334, December. [Downloadable!]
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  2. Timothy Halliday, 2006. "Income Risk and Health," Working Papers 200612, University of Hawaii at Manoa, Department of Economics. [Downloadable!]
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  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. [Downloadable!] (restricted)
  4. 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.
  5. Thierry Magnac, 2004. "Panel Binary Variables and Sufficiency: Generalizing Conditional Logit," Econometrica, Econometric Society, vol. 72(6), pages 1859-1876, November. [Downloadable!] (restricted)
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  6. Timothy J Halliday, 2005. "Heterogeneity, State Dependence and Health," Working Papers 200503, University of Hawaii at Manoa, Department of Economics. [Downloadable!]
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  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. [Downloadable!]
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  1. Halliday, Timothy, 2008. "Heterogeneity, State Dependence and Health," IZA Discussion Papers 3463, Institute for the Study of Labor (IZA). [Downloadable!]
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