Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2009:18: A Flexible Hazard Rate Model for Grouped Duration Data

Wolfgang Hess (wolfgang.hess@nek.lu.se)
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Wolfgang Hess: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

Abstract: This paper proposes a discrete-time hazard regression approach based on the interrelation between hazard rate models and excess over threshold models, which are frequently encountered in extreme value modelling. The proposed duration model incorporates a grouped-duration analogue of the well-known Cox proportional hazards model and a proportional odds model as special cases. The theoretical setup of the model is motivated, and simulation results are reported to suggest that it performs well. A numerical example using US unemployment data is also provided.

Keywords: Discrete-Time Duration Model; Hazard Rate; Threshold Excess Model; Unemployment Duration

JEL-codes: C41; J64

30 pages, November 9, 2009

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