Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2013:28: Competing-Risks Duration Models with Correlated Random Effects: An Application to Dementia Patients’ Transition Histories

Wolfgang Hess (), Larissa Schwarzkopf (), Matthias Hunger () and Rolf Holle ()
Additional contact information
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
Larissa Schwarzkopf: Institute of Health Economics and Health Care Management, Helmholtz Zentrum, Postal: Helmholtz Zentrum, München, Germany
Matthias Hunger: Institute of Health Economics and Health Care Management, Helmholtz Zentrum, Postal: Helmholtz Zentrum, München, Germany
Rolf Holle: Institute of Health Economics and Health Care Management, Helmholtz Zentrum, Postal: Helmholtz Zentrum, München, Germany

Abstract: Multi-state transition models are widely applied tools to analyze individual event histories in the medical or social sciences. In this paper we propose the use of (discrete-time) competing-risks duration models to analyze multi-transition data. Unlike conventional Markov transition models, these models allow the estimated transition probabilities to depend on the time spent in the current state. Moreover, the models can be readily extended to allow for correlated transition probabilities. A further virtue of these models is that they can be estimated using conventional regression tools for discrete-response data, such as the multinomial logit model. The latter is implemented in many statistical software packages, and can be readily applied by empirical researchers. Moreover, model estimation is feasible, even when dealing with very large data sets, and simultaneously allowing for a flexible form of duration dependence and correlation between transition probabilities. We derive the likelihood function for a model with three competing target states, and discuss a feasible and readily applicable estimation method. We also present results from a simulation study, which indicate adequate performance of the proposed approach. In an empirical application we analyze dementia patients’ transition probabilities from the domestic setting, taking into account several, partly duration-dependent covariates.

Keywords: Competing risks; Dementia; Discrete-time duration model; Multinomial logit; Random effects; Transition

JEL-codes: C41; I10

15 pages, September 9, 2013

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