New methods for analyzing structural models of labor force dynamics

Christopher Flinn, J. Heckman

    Research output: Contribution to journalArticle

    Abstract

    The economic theory of decision-making under uncertainty is used to produce three econometric models of dynamic discrete choice: (1) for a single spell of unemployment; (2) for an equilibrium two-state model of employment and non-employment; (3) for a general three-state model with a non-market sector. The paper provides a structural economic motivation for the continuous time Markov (or more generally 'competing risks') model widely used in longitudinal analysis in biostatistics and sociology, and it extends previous work on dynamic discrete choice to a continuous time setting. An important feature of identification analysis is separation of economic parameters that can only be identified by assuming arbitrary functional forms from economic parameters that can be identified by non-parametric procedures. The paper demonstrates that most econometric models for the analysis of truncated data are non-parametrically under-identified. It also demonstrates that structural estimators frequently violate standard regularity conditions. The standard asymptotic theory is modified to account for this essential feature of many structural models of labor force dynamics. Empirical estimates of an equilibrium two-state model of employment and non-employment are presented.

    Original languageEnglish (US)
    Pages (from-to)115-168
    Number of pages54
    JournalJournal of Econometrics
    Volume18
    Issue number1
    DOIs
    StatePublished - 1982

    Fingerprint

    Structural Model
    Economics
    Discrete Choice
    Econometrics
    Continuous Time
    Longitudinal Analysis
    Competing Risks Model
    Biostatistics
    Truncated Data
    Model
    Unemployment
    Asymptotic Theory
    Violate
    Regularity Conditions
    Demonstrate
    Sector
    Decision Making
    Structural model
    Labor force
    Estimator

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Finance
    • Statistics and Probability

    Cite this

    New methods for analyzing structural models of labor force dynamics. / Flinn, Christopher; Heckman, J.

    In: Journal of Econometrics, Vol. 18, No. 1, 1982, p. 115-168.

    Research output: Contribution to journalArticle

    Flinn, Christopher ; Heckman, J. / New methods for analyzing structural models of labor force dynamics. In: Journal of Econometrics. 1982 ; Vol. 18, No. 1. pp. 115-168.
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