HANDBOOK OF LABOR ECONOMICS, VOL 4A

6 Duration Models and Search Models

In this section we relate the previous discussion to the competing risks model and the search model. We show that the competing risk model can be written in a way that is almost identical to the Roy model. We also show how the basic ideas of exclusion restrictions can be used to identify a version of a search model.

6.1 Competing risks model

With duration data a researcher observes the elapsed time until some event occurs. The prototypical example in labor economics is the duration of unemployment and we focus on that example. We explain why identification of this model is almost identical to identification of the Roy model. Let denote the length of an unemployment spell. There are (at least) four different ...