A note on stock sampling and maximum duration

Govert Bijwaard

No EI 2006-22, Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute

Abstract: An issue hardly ever mentioned in the analysis of labour market transitions is that for some individuals labour market transitions occur at a very low rate. Therefore, these individuals might stay on disability benefits or in domestic care till they reach the retirement age of 65. This implies that the duration on disability and of non-participating women has a upper bound of the time till retirement. Despite the growing availability of panel data on labour market transitions many household surveys are still based on stock based sampling. In this paper estimation of a duration model in which a positive fraction of individuals reaches a maximum duration is derived for stock sampled data. A mixed proportional hazard model with a piecewise constant baseline hazard leads to a relatively simple closed-form expression in the log likelihood. Discrete unobserved heterogeneity is assumed. Non-constant entry rates into the labour market state are allowed for by assuming a yearly fluctuating rate.

Keywords: maximum duration; mixed proportional hazard; mover-stayer model; stock sampling (search for similar items in EconPapers)
JEL-codes: C41 J64 (search for similar items in EconPapers)
Date: 2006-05-11
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