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Estimation of Heterogeneous Treatment Effects on Hazard Rates

  • Gaure, Simen

    ()

    (Ragnar Frisch Centre for Economic Research)

  • Røed, Knut

    ()

    (Ragnar Frisch Centre for Economic Research)

  • van den Berg, Gerard J.

    ()

    (University of Mannheim)

  • Zhang, Tao

    ()

    (Ragnar Frisch Centre for Economic Research)

Consider a setting where a treatment that starts at some point during a spell (e.g. in unemployment) may impact on the hazard rate of the spell duration, and where the impact may be heterogeneous across subjects. We provide Monte Carlo evidence on the feasibility of estimating the distribution of treatment effects from duration data with selectivity, by means of a nonparametric maximum likelihood estimator with unrestricted numbers of mass points for the heterogeneity distribution. We find that specifying the treatment effect as homogenous may yield misleading average results if the true effects are heterogeneous, even when the sorting into treatment is appropriately accounted for. Specifying the treatment effect as a random coefficient allows for precise estimation of informative average treatment effects including the program’s overall impact on the mean duration.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4794.

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Length: 37 pages
Date of creation: Feb 2010
Date of revision:
Handle: RePEc:iza:izadps:dp4794
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  1. Crépon, Bruno & Ferracci, Marc & Jolivet, Grégory & van den Berg, Gerard J., 2008. "Active Labor Market Policy Effects in a Dynamic Setting," IZA Discussion Papers 3848, Institute for the Study of Labor (IZA).
  2. Knut Røed & Oddbjørn Raaum, 2006. "Do Labour Market Programmes Speed up the Return to Work?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(5), pages 541-568, October.
  3. Jaap H. Abbring & Gerard J. van den Berg, 2003. "The Nonparametric Identification of Treatment Effects in Duration Models," Econometrica, Econometric Society, vol. 71(5), pages 1491-1517, 09.
  4. Baker, Michael & Melino, Angelo, 2000. "Duration dependence and nonparametric heterogeneity: A Monte Carlo study," Journal of Econometrics, Elsevier, vol. 96(2), pages 357-393, June.
  5. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
  6. Richardson, Katarina & van den Berg, Gerard J, 2008. "Duration dependence versus unobserved heterogeneity in treatment effects: Swedish labor market training and the transition rate to employment," Working Paper Series 2008:7, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  7. Carneiro, Pedro & Hansen, Karsten & Heckman, James, 2003. "Estimating distributions of treatment effects with an application to the returns to schooling and measurement of the effects of uncertainty on college choice," Working Paper Series 2003:9, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  8. Jaap H. Abbring & Gerard J. van den Berg, 2004. "Analyzing the effect of dynamically assigned treatments using duration models, binary treatment models, and panel data models," Empirical Economics, Springer, vol. 29(1), pages 5-20, January.
  9. Michael Rosholm & Michael Svarer, 2008. "The Threat Effect of Active Labour Market Programmes," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(2), pages 385-401, 06.
  10. Abbring, Jaap H & van den Berg, Gerard J, 2005. "Social experiments and intrumental variables with duration outcomes," Working Paper Series 2005:11, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  11. Fredriksson, Peter & Johansson, Per, 2008. "Dynamic Treatment Assignment," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 435-445.
  12. Aakvik, Arild & Heckman, James J. & Vytlacil, Edward J., 2005. "Estimating treatment effects for discrete outcomes when responses to treatment vary: an application to Norwegian vocational rehabilitation programs," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 15-51.
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