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Duration Models: Specification, Identification, and Multiple Durations

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Van den Berg, Gerard J.

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Abstract

Since the early 1980s, the econometric analysis of duration variables has become widespread. This chapter provides an overview of duration analysis, with an emphasis on the specification and identification of duration models, and with special attention to models for multiple durations. Most of the chapter deals with so-called reduced-form duration models, notably the popular Mixed Proportional Hazard (MPH) model and its multivariate extensions. The MPH model is often used to describe the relation between the empirical exit rate and ``background variables'' in a concise way. However, since the applications usually interpret the results in terms of some economic-theoretical model, we examine to what extent the deep structural parameters of some important theoretical models can be related to reduced-form parameters. We subsequently examine the specification and identification of the MPH model in great detail, we provide intuition on what drives identification, and we infer to what extent biases may occur because of misspecifications. This examination is carried out separately for the case of single-spell data and the case of multi-spell data. We also compare different functional forms for the unobserved heterogeneity distribution. Next, we examine models for multiple durations. In the applied econometric literature on the estimation of multiple-duration models, the range of different models is actually not very large. Typically, the models allow for dependence between the duration variables by way of their unobserved determinants, with each single duration following its own MPH model. In addition to this, the model may allow for an interesting ``causal'' effect of one duration on the other, as motivated by an underlying economic theory. For all these models we examine the conditions for identification. Some of these are intimately linked to particular estimation strategies. The multiple-duration model where the marginal duration distributions each satisfy an MPH specification, and the durations can only be dependent by way of their unobserved determinants, is called the Multivariate Mixed Proportional Hazard (MMPH) model. For this model, we address the issue of the dimensionality of the heterogeneity distribution and we compare the flexibility of different parametric heterogeneity distributions. On a number of occasions, we incorporate recent insights from the biostatistical literature on duration analysis, and we contrast points of view in this literature to those in the econometric literature. Finally, throughout the chapter, we discuss the importance of the possible collection of additional data.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9446.

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Date of creation: 2000
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Handle: RePEc:pra:mprapa:9446

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C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis

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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.)

  1. Martinez-Granado, Maite, 2002. "Self-Employment and Labour Market Transitions: A Multiple State Model," CEPR Discussion Papers 3661, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Arnstein Aassve, 2000. "Economic resources and single motherhood: incidence and resolution of premarital childbearing among young American women," MPIDR Working Papers WP-2000-015, Max Planck Institute for Demographic Research, Rostock, Germany. [Downloadable!]
  3. Tatsiramos, Konstantinos, 2004. "The Effect of Unemployment Insurance on Unemployment Duration and the Subsequent Employment Stability," IZA Discussion Papers 1163, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Angel Calderon Madrid, 2006. "Revisiting the Employability Effects of Training Programs for the Unemployed in Developing Countries," RES Working Papers 3224, Inter-American Development Bank, Research Department. [Downloadable!]
  5. Angel Calderon Madrid, 2006. "Un nuevo vistazo a los efectos en la capacidad de empleo de los programas de capacitación para desempleados en países en desarrollo," RES Working Papers 3225, Inter-American Development Bank, Research Department. [Downloadable!]
  6. SANDI mourad, 2005. "The Effect of unemployment benefit degression on union membership of unemployed people," Economics Bulletin, Economics Bulletin, vol. 10(2), pages 1-10. [Downloadable!]
  7. van Ours, Jan C., 2000. "Do Active Labor Market Policies Help Unemployed Workers to Find and Keep Regular Jobs?," IZA Discussion Papers 121, Institute for the Study of Labor (IZA). [Downloadable!]
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  8. Ours, J.C. van, 2000. "Do active labor market policies help unemployed workers to find and keep regular jobs?," Discussion Paper 10, Tilburg University, Center for Economic Research. [Downloadable!]
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