John K. Dagsvik
Justifying Functional Forms in Models for Transitions between Discrete States, with Particular Reference to Employment-Unemployment Dynamics
Abstract: This paper proposes a particular axiomatic approach to
motivate the choice of functional forms and distribution of unobservables
in continuous time models for discrete panel data analysis. We discuss in
particular applications with data on transitions between employment and
unemployment. This framework yields a characterization of transition
probabilities and duration distributions in terms of structural parameters
of the utility function and choice constraints. Moreover, it is discussed
how the modeling framework can be extended to allow for involuntary
transitions, structural state dependence and random effects.
Keywords: Discrete choice in continuous time; Duration of unemployment/employment; Random utility models; Functional form; Invariance principles; (follow links to similar papers)
JEL-Codes: C23; C25; C41; (follow links to similar papers)
40 pages, April 25, 2006
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