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Gamma Unobserved Heterogeneity and Duration Bias

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  • Pål Børing

Abstract

Røed et al. (1999) demonstrate that the standard result of known negative duration bias does not necessarily hold in a two-state mixed proportional hazard (MPH) model. We show that the duration bias is still ambiguous in a MPH model with a multivariate gamma distribution. A discrete time two-state version of our MPH model is developed to analyze the duration of higher education. The estimation results show that we cannot reject the hypothesis that the two unobserved heterogeneity variables are uncorrelated. Accepting this hypothesis implies that the standard result holds in our analysis.

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  • Pål Børing, 2010. "Gamma Unobserved Heterogeneity and Duration Bias," Econometric Reviews, Taylor & Francis Journals, vol. 29(1), pages 1-19.
    • Handle: RePEc:taf:emetrv:v:29:y:2010:i:1:p:1-19
    DOI: 10.1080/07474930903323822
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    References listed on IDEAS

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    1. Arulampalam, Wiji & Naylor, Robin A. & Smith, Jeremy P, 2001. "A hazard model of the probability of medical school dropout in the united kingdom," The Warwick Economics Research Paper Series (TWERPS) 597, University of Warwick, Department of Economics.
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    5. Zhang, Tao, 2003. "A Monte Carlo study on non-parametric estimation of duration models with unobserved heterogeneity," Memorandum 25/2003, Oslo University, Department of Economics.
    6. James J. Heckman & Christopher R. Taber, 1994. "Econometric Mixture Models and More General Models for Unobservables in Duration Analysis," NBER Technical Working Papers 0157, National Bureau of Economic Research, Inc.
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