Analysing incomplete individual employment histories using indirect inference

In this paper we apply the Indirect Inference method to estimate the parameters of a semi-Markov transition model when the data are subject to a complex form of censoring. There is no explicit expression for the likelihood function, and therefore Maximum Likelihood estimation is computationally burd...

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Bibliographic Details
Published inJournal of applied econometrics (Chichester, England) Vol. 10; no. Issue Supplement S1; pp. S153 - S169
Main Authors Magnac, Thierry, Robin, Jean-Marc, Visser, Michael
Format Journal Article
LanguageEnglish
Published Wiley 1995
Subjects
Economics and Finance
Humanities and Social Sciences
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ISSN0883-7252
1099-1255

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Summary:In this paper we apply the Indirect Inference method to estimate the parameters of a semi-Markov transition model when the data are subject to a complex form of censoring. There is no explicit expression for the likelihood function, and therefore Maximum Likelihood estimation is computationally burdensome. The econometric methodology of Indirect Inference is first tested on simulated data under various assumptions about the distribution of spell durations and transitions. Then, it is applied to labour market transitions between self-employment, wage-work, and unemployment using the 1986-1988 French labour force survey. Although the analysis is basically a reduced-form analysis, we motivate our transition model in terms of a structural search model.
ISSN:0883-7252
1099-1255