Microeconometrics Methods and Applications

Introduction

This chapter deals with several different duration models that can be interpreted broadly as multivariate models, a category that covers both parallel and repeated transitions. Any transition model that involves more than one destination state can be regarded as a multivariate model because the analysis will involve joint distribution of two or more durations. The models we consider arise in a variety of ways and apply to several different types of data. Despite their differences, they are grouped in this chapter for reasons of organizational convenience.

To be concrete consider some examples. A familiar model from labor economics involves a transition from unemployment to employment or out of the labor force. The first transition can be further broken into return to the old job or to a new job. These destinations are mutually exclusive. An unemployment spell may end by a transition to any one of the destinations. A variant of this example considers an unemployed individual who could find either a new full-time or part-time job or remain unemployed. Thus there are three possible states (destinations). The models of Chapters 17 and 18 dealt with transitions between two states. One can still use the two-state methods to handle such data. For example, state 1 could be that of full-time employment and state 0 could be any other state. This would, as before, involve modeling one hazard rate.