Instrumental Variable Estimation for Duration Data

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Instrumental Variable Estimation for Duration Data

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Govert E. Bijwaard () (Erasmus University Rotterdam)

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Govert Ewout Bijwaard

Abstract

In this article we develop an Instrumental Variable estimation procedure that corrects for possible endogeneity of a variable in a duration model. We assume a Generalized Accelerated Failure Time (GAFT) model. This model is based on transforming the durations and assuming a distribution for these transformed durations. The GAFT model encompasses two competing approaches to duration data; the (Mixed) Proportional Hazard (MPH) model and the Accelerated Failure Time (AFT) model. The basis of the Instrumental Variable Linear Rank estimator (IVLR) is that for the true GAFT model the instrument does not influence the hazard of the transformed duration. The inverse of an extended rank test provide the estimation equations the IVLR estimation procedure is based on. We discuss the large sample properties and the efficiency of this estimator. We discuss the practical issues of implementation of the estimator. We apply the IVLR estimation approach to the Illinois re-employment bonus experiment. In this experiment individuals who became unemployed were divided at random in three groups: two bonus groups and a control group. Those in the bonus groups could refuse to participate in the experiment. It is very likely that this decision is related to the unemployment duration. We use the IVLR estimator to obtain the effect of these endogenous claimant and employer bonuses on the re-employment hazard.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 08-032/4.

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Date of creation: 27 Mar 2008
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Handle: RePEc:dgr:uvatin:20080032

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Paper
- Bijwaard, G.E., 2007. "Instrumental variable estimation for duration data," Econometric Institute Report EI 2007-14 Revision_Date:, Erasmus University Rotterdam, Econometric Institute. [Downloadable!]
- G.E. Bijwaard, 2002. "Instrumental variable estimation for duration data," Econometric Institute Report 291, Erasmus University Rotterdam, Econometric Institute. [Downloadable!]
- Bijwaard, G.E., 2002. "Instrumental variable estimation for duration data," Econometric Institute Report EI 2002-39 Revision_Date:, Erasmus University Rotterdam, Econometric Institute. [Downloadable!]

Find related papers by JEL classification:
C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search

This paper has been announced in the following NEP Reports:

NEP-ALL-2008-06-21 (All new papers)
NEP-ECM-2008-06-21 (Econometrics)

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.:

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Other versions:
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Other versions:
- Abbring, Jaap H & van den Berg, Gerard J, 2005. "Social experiments and intrumental variables with duration outcomes," Working Paper Series 2005:11, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
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Full references

Cited by:
(explanations, 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.)

Jaap Abbring & Gerard van den Berg, 2005. "Social experiments and instrumental variables with duration outcomes," IFS Working Papers W05/19, Institute for Fiscal Studies. [Downloadable!]
Other versions:
- Abbring, Jaap H & van den Berg, Gerard J, 2005. "Social experiments and intrumental variables with duration outcomes," Working Paper Series 2005:11, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
- Jaap H. Abbring & Gerard J. van den Berg, 2005. "Social Experiments and Instrumental Variables with Duration Outcomes," Tinbergen Institute Discussion Papers 05-047/3, Tinbergen Institute. [Downloadable!]

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