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Duration Dependence and Timevarying Variables in Discrete Time Duration Models


  • Anna Christina D'Addio
  • Bo E. Honoré

    () (Department of Economics, University of Aarhus, Denmark)


This paper considers estimation of a dynamic discrete choice model with second order state dependence in the presence of strictly exogenous time-varying explanatory variables. We propose new method for estimating such models, and a small Monte Carlo study suggests that the method erforms well in practice. The method is used to test for duration dependence in labour market spells for French youth. The novelty in the application is that we are able to control for time-varying explanatory variables. In a discrete time duration model, duration dependence will result in second order state dependence, and the paper therefore also adds to the literature on estimation of duration models with unobserved heterogeneity.

Suggested Citation

  • Anna Christina D'Addio & Bo E. Honoré, "undated". "Duration Dependence and Timevarying Variables in Discrete Time Duration Models," Economics Working Papers 2002-13, Department of Economics and Business Economics, Aarhus University.
  • Handle: RePEc:aah:aarhec:2002-13

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    References listed on IDEAS

    1. Olivier Jean Blanchard & Peter Diamond, 1994. "Ranking, Unemployment Duration, and Wages," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 417-434.
    2. David Blanchflower, 1996. "Youth Labour Markets in 23 Countries: A Comparison Using Micro Data," CEP Discussion Papers dp0284, Centre for Economic Performance, LSE.
    3. Chintagunta, Pradeep & Kyriazidou, Ekaterini & Perktold, Josef, 2001. "Panel data analysis of household brand choices," Journal of Econometrics, Elsevier, vol. 103(1-2), pages 111-153, July.
    4. Hilary W. Hoynes & Kenneth Y. Chay & Dean Hyslop, 2004. "True State Dependence In Monthly Welfare Participation:A Nonexperimental Analysis," Working Papers 533, University of California, Davis, Department of Economics.
    5. Anna Christina D'Addio & Michael Rosholm, "undated". "Left-Censoring in Duration Data: Theory and Applications," Economics Working Papers 2002-5, Department of Economics and Business Economics, Aarhus University.
    6. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
    7. Bo Honore & Ekaterini Kyriazidou & J. L. Powell, 2000. "Estimation of tobit-type models with individual specific effects," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 341-366.
    8. Manski, Charles F, 1987. "Semiparametric Analysis of Random Effects Linear Models from Binary Panel Data," Econometrica, Econometric Society, vol. 55(2), pages 357-362, March.
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    Cited by:

    1. Ulrich Kaiser & Hans Christian Kongsted, 2004. "True versus spurious state dependence in firm performance: the case of West German exports," CAM Working Papers 2004-04, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
    2. Paul Frijters & Maarten Lindeboom & Gerard van den Berg, 2000. "Persistencies in the Labour Market," School of Economics and Finance Discussion Papers and Working Papers Series 087a, School of Economics and Finance, Queensland University of Technology.

    More about this item


    Panel data; Dynamic Discrete Choice; Unemployment; Duration Dependence;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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