RT Generic
T1 Dynamic binary outcome models with maximal heterogeneity
A1 Browning, Martin
A1 Carro, Jesús M.
A2 Universidad Carlos III de Madrid. Departamento de Economía, 
AB Most econometric schemes to allow for heterogeneity in micro behaviour have twodrawbacks: they do not fit the data and they rule out interesting economic models. In this paperwe consider the time homogeneous first order Markov (HFOM) model that allows for maximalheterogeneity. That is, the modelling of the heterogeneity does not impose anything on the data(except the HFOM assumption for each agent) and it allows for any theory model (that gives aHFOM process for an individual observable variable). `Maximal' means that the jointdistribution of initial values and the transition probabilities is unrestricted.We establish necessary and sufficient conditions for the point identification of ourheterogeneity structure and show how it depends on the length of the panel. A feasible MLestimation procedure is developed. Tests for a variety of subsidiary hypotheses such as theassumption that marginal dynamic effects are homogeneous are developed.We apply our techniques to a long panel of Danish workers who are very homogeneousin terms of observables. We show that individual unemployment dynamics are veryheterogeneous, even for such a homogeneous group. We also show that the impact of cyclicalvariables on individual unemployment probabilities differs widely across workers. Someworkers have unemployment dynamics that are independent of the cycle whereas others arehighly sensitive to macro shocks.
SN 2340-5031
YR 2009
FD 2009-02
LK https://hdl.handle.net/10016/3802
UL https://hdl.handle.net/10016/3802
LA eng
DS e-Archivo
RD 7 sept. 2024