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Testing for State Dependence with Time-Variant Transition Probabilities

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  • Timothy J. Halliday

    ()
    (Department of Economics, University of Hawaii at Manoa
    John A. Burns School of Medicine)

Abstract

We 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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File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_06-14.pdf
File Function: First version, 2006
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Bibliographic Info

Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 200614.

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Length: 24 pages
Date of creation: 31 Dec 2006
Date of revision:
Handle: RePEc:hai:wpaper:200614

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Keywords: Dynamic Panel Data Models; State Dependence; Health;

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References

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  1. Timothy J Halliday, 2005. "Heterogeneity, State Dependence and Health," Working Papers 200503, University of Hawaii at Manoa, Department of Economics.
  2. Thierry Magnac, 2004. "Panel binary variables and sufficiency : generalizing conditional logit," Working Papers 155465, Institut National de la Recherche Agronomique, France.
  3. Timothy Halliday, 2006. "Income Risk and Health," Working Papers 200612, University of Hawaii at Manoa, Department of Economics.
  4. Anne Case & Darren Lubotsky & Christina Paxson, 2002. "Economic status and health in childhood: the origins of the gradient," Working Papers 262, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Health and Wellbeing..
  5. 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.
  6. 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.
  7. 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.
  8. Hahn, Jinyong, 2001. "The Information Bound Of A Dynamic Panel Logit Model With Fixed Effects," Econometric Theory, Cambridge University Press, vol. 17(05), pages 913-932, October.
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Cited by:
  1. Halliday, Timothy J., 2008. "Heterogeneity, State Dependence and Health," IZA Discussion Papers 3463, Institute for the Study of Labor (IZA).
  2. Timothy J. Halliday, 2009. "Health Inequality over the Life-Cycle," Working Papers 200908, University of Hawaii at Manoa, Department of Economics.
  3. Bartolucci, Francesco & Nigro, Valentina & Pigini, Claudia, 2013. "Testing for state dependence in binary panel data with individual covariates," MPRA Paper 48233, University Library of Munich, Germany.

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