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A Bayesian Semiparametric Competing Risk Model with Unobserved Heterogeneity

Author(s)
Burda, Martin; Harding, Matthew; Hausman, Jerry A.
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Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/
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Abstract
This paper generalizes existing econometric models for censored competing risks by introducing a new flexible specification based on a piecewise linear baseline hazard, time-varying regressors, and unobserved individual heterogeneity distributed as an infinite mixture of generalized inverse Gaussian (GIG) densities, nesting the gamma kernel as a special case. A common correlated latent time effect induces dependence among risks. Our model is based on underlying latent exit decisions in continuous time while only a time interval containing the exit time is observed, as is common in economic data. We do not make the simplifying assumption of discretizing exit decisions—our competing risk model setup allows for latent exit times of different risk types to be realized within the same time period. In this setting, we derive a tractable likelihood based on scaled GIG Laplace transforms and their higher-order derivatives. We apply our approach to analyzing the determinants of unemployment duration with exits to jobs in the same industry or a different industry among unemployment insurance recipients on nationally representative individual-level survey data from the US Department of Labor. Our approach allows us to conduct a counterfactual policy experiment by changing the replacement rate: we find that the impact of its change on the probability of exit from unemployment is inelastic.
Date issued
2014-03
URI
http://hdl.handle.net/1721.1/103974
Department
Massachusetts Institute of Technology. Department of Economics
Journal
Journal of Applied Econometrics
Publisher
John Wiley & Sons
Citation
Burda, Martin, Matthew Harding, and Jerry Hausman. “A Bayesian Semiparametric Competing Risk Model with Unobserved Heterogeneity.” Journal of Applied Econometrics 30, no. 3 (March 3, 2014): 353–376.
Version: Author's final manuscript
ISSN
08837252

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