Econometrica: Mar 1984, Volume 52, Issue 2

A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data

https://doi.org/0012-9682(198403)52:2<271:AMFMTI>2.0.CO;2-U
p. 271-320

B. Singer, J. Heckman

Conventional analyses of single spell duration models control for unobservables using a random effect estimator which the distribution of unobservables selected by ad hoc criteria. Both theoretical and empirical examples indicate that estimates of structural parameters obtained from conventional procedures are very sensitive to the choice of mixing distribution. Conventional procedures overparameterize duration models. We develop a consistent nonparametric maximum likelihood estimator for the distribution of unobservables and a computational strategy for implementing it. For a sample of unemployed workers our estimator produces estimates in concordance with standard search theory while conventional estimators do not.

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