Testing for State Dependence with Time-Variant Transition Probabilities
AbstractWe consider the identification of state dependence in a dynamic Logit model with timevariant transition probabilities and an arbitrary distribution of the unobserved heterogeneity. We derive a simple result that allows us to test for the presence of state dependence in this model. 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 for state dependence 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 InfoPaper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 200614.
Length: 24 pages
Date of creation: 31 Dec 2006
Date of revision:
Other versions of this item:
- Timothy Halliday, 2007. "Testing for State Dependence with Time-Variant Transition Probabilities," Econometric Reviews, Taylor & Francis Journals, vol. 26(6), pages 685-703.
- NEP-ALL-2007-01-13 (All new papers)
- NEP-ECM-2007-01-13 (Econometrics)
- NEP-ETS-2007-01-13 (Econometric Time Series)
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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