Bayesian Inference for Duration Data with Unobserved and Unknown Heterogeneity: Monte Carlo Evidence and an Application
AbstractThis paper describes a semiparametric Bayesian method for analyzing duration data. The proposed estimator specifies a complete functional form for duration spells, but allows flexibility by introducing an individual heterogeneity term, which follows a Dirichlet mixture distribution. I show how to obtain predictive distributions for duration data that correctly account for the uncertainty present in the model. I also directly compare the performance of the proposed estimator with Heckman and Singer's (1984) Non Parametric Maximum Likelihood Estimator (NPMLE). The methodology is applied to the analysis of youth unemployment spells. Compared to the NPMLE, the proposed estimator reflects more accurately the uncertainty surrounding the heterogeneity distribution.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 996.
Length: 45 pages
Date of creation: Jan 2004
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Find related papers by JEL classification:
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
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