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Duration Dependence and Timevarying Variables in Discrete Time Duration Models

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  • D'Addio, Anna Cristina
  • Honoré, Bo E.

Abstract

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 a new method for estimating such models, and a small Monte Carlo study suggests that the method performs well in practice. The method is used to test for duration dependence in labour market spells for young people in France. 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

  • D'Addio, Anna Cristina & Honoré, Bo E., 2010. "Duration Dependence and Timevarying Variables in Discrete Time Duration Models," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 30(2), December.
    • Handle: RePEc:sbe:breart:v:30:y:2010:i:2:a:3674
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    References listed on IDEAS

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    1. 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.
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    Cited by:

    1. Paul Frijters, 2000. "Persistencies in the Labor Market," Econometric Society World Congress 2000 Contributed Papers 1303, Econometric Society.
    2. Kaiser, Ulrich & Kongsted, Hans Christian, 2004. "True Versus Spurious State Dependence in Firm Performance: The Case of West German Exports," ZEW Discussion Papers 04-81, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    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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