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Discrete Time Duration Models with Group-level Heterogeneity

Feb 2006
Working Paper
By  Anders Frederiksen, Bo Honoré, Luojia Hu
Dynamic discrete choice panel data models have received a great deal of attention. In those models, the dynamics is usually handled by including the lagged outcome as an explanatory variable. In this paper we consider an alternative model in which the dynamics is handled by using the duration in the current state as a covariate. We propose estimators that allow for group specific effect in parametric and semiparametric versions of the model. The proposed method is illustrated by an empirical analysis of job durations allowing for firm level effects.