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Duration Dependence and Timevarying Variables in Discrete Time Duration Models

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  • Anna Christina D'Addio
  • Bo E. Honoré

    ()
    (Department of Economics, University of Aarhus, Denmark)

Abstract

This paper considers estimation of a dynamic discrete choice model with second order state dependence in the presence of strictly exogenous time-varying explanatory variables. We propose new method for estimating such models, and a small Monte Carlo study suggests that the method erforms well in practice. The method is used to test for duration dependence in labour market spells for French youth. The novelty in the application is that we are able to control for time-varying explanatory variables. In a discrete time duration model, duration dependence will result in second order state dependence, and the paper therefore also adds to the literature on estimation of duration models with unobserved heterogeneity.

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File URL: ftp://ftp.econ.au.dk/afn/wp/02/wp02_13.pdf
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Bibliographic Info

Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2002-13.

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Length: 50
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Handle: RePEc:aah:aarhec:2002-13

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Web page: http://www.econ.au.dk/afn/

Related research

Keywords: Panel data; Dynamic Discrete Choice; Unemployment; Duration Dependence;

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References

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  1. Olivier Jean Blanchard & Peter Diamond, 1990. "Ranking, Unemployment Duration, and Wages," NBER Working Papers 3387, National Bureau of Economic Research, Inc.
  2. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  3. Bo Honore & Ekaterini Kyriazidou & J. L. Powell, 2000. "Estimation of tobit-type models with individual specific effects," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 341-366.
  4. Manski, Charles F, 1987. "Semiparametric Analysis of Random Effects Linear Models from Binary Panel Data," Econometrica, Econometric Society, vol. 55(2), pages 357-62, March.
  5. Hilary W. Hoynes & Kenneth Y. Chay & Dean Hyslop, 2004. "True State Dependence In Monthly Welfare Participation:A Nonexperimental Analysis," Working Papers 533, University of California, Davis, Department of Economics.
  6. Chintagunta, Pradeep & Kyriazidou, Ekaterini & Perktold, Josef, 2001. "Panel data analysis of household brand choices," Journal of Econometrics, Elsevier, vol. 103(1-2), pages 111-153, July.
  7. Anna Christina D'Addio & Michael Rosholm, . "Left-Censoring in Duration Data: Theory and Applications," Economics Working Papers 2002-5, School of Economics and Management, University of Aarhus.
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Citations

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Cited by:
  1. Frijters, Paul & Lindeboom, Maarten & van den Berg, Gerard J., 2009. "Persistencies in the Labour Market," IZA Discussion Papers 4025, Institute for the Study of Labor (IZA).
  2. Ulrich Kaiser & Hans Christian Kongsted, 2004. "True versus spurious state dependence in firm performance: the case of West German exports," CAM Working Papers 2004-04, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.

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