The (Mis)Specification of Discrete Duration Models with Unobserved Heterogeneity: A Monte Carlo Study

39 Pages Posted: 1 May 2009

See all articles by Cheti Nicoletti

Cheti Nicoletti

University of York - Department of Economics and Related Studies

Concetta Rondinelli

Bank of Italy

Date Written: March 23, 2009

Abstract

Empirical researchers usually prefer statistical models that can be easily estimated using standard software packages. One such model is the sequential binary model with or without normal random effects; such models can be adopted to estimate discrete duration models with unobserved heterogeneity. But ease of estimation may come at a cost. In this paper we conduct a Monte Carlo simulation to evaluate the consequences of omitting or misspecifying the unobserved heterogeneity distribution in single-spell discrete duration models.

Keywords: discrete duration models, unobserved heterogeneity, Monte Carlo simulations

JEL Classification: C23, C25

Suggested Citation

Nicoletti, Cheti and Rondinelli, Concetta, The (Mis)Specification of Discrete Duration Models with Unobserved Heterogeneity: A Monte Carlo Study (March 23, 2009). Bank of Italy Temi di Discussione (Working Paper) No. 705, Available at SSRN: https://ssrn.com/abstract=1396131 or http://dx.doi.org/10.2139/ssrn.1396131

Cheti Nicoletti

University of York - Department of Economics and Related Studies ( email )

Heslington
York, YO1 5DD
United Kingdom

Concetta Rondinelli (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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