Transition models with measurement errors

In this paper, we estimate a transition model that allows for measurement e rrors in the data. The measurement errors arise because the survey design i s partly retrospective, so that individuals sometimes forget or misclassify their past labor market transitions. The observed data are adjusted for er rors via a measurement-error mechanism. The parameters of the distribution of the true data, and those of the measurement-error mechanism are estimate d by a two-stage method. The results, based on the 1990-1992 French labor f orce survey, show that neglecting measurement errors leads to an underestim ation of the average durations spent in labor market states. The estimates of some important transition probabilities between states are also biased b y the measurement errors.