ATTRITION IN LONGITUDINAL PANEL-DATA AND THE EMPIRICAL-ANALYSIS OF DYNAMIC LABOR-MARKET BEHAVIOR

In the empirical analysis of unemployment durations and job durations, it is generally assumed that the stochastic processes underlying labo ur market behaviour and the behaviour concerning participation in a pa nel survey are independent. However, there are reasons to believe that the probability of dropping out of the panel is related to the rate a t which a (different) job is found. If there is such a relation, and i f it is ignored, then the estimator of the rate at which individuals b ecome employed or change jobs will generally be inconsistent. In this paper we analyse the relation between the duration spent in a particul ar labour market state and the duration of panel survey participation, by explicitly modelling and estimating the joint distribution of both durations. The emphasis will be on models allowing for stochastically related unobserved determinats of both types of duration. We estimate models both for unemployment durations and for job durations.