This paper considers Markov error-correction (MEC) models in which deviations from the long-run equilibrium are characterized by different rates of adjustment. To motivate our analysis and illustrate the various issues involved, our discussion is structured around the analysis of the long-run...

In estimating the effect of an ordered treatment τ on a count response y with an observational data where τ is self-selected (not randomized), observed variables x and unobserved variables ϵ can be unbalanced across the control group (τ = 0) and the treatment groups (τ = 1, …, J). While...

Moral hazard is easy to justify theoretically but difficult to detect empirically. Individuals may report sick due to illness as well as for moral hazard reasons. Potential abuse of the sickness insurance system in Sweden is estimated by comparing the change between the number of men and women...

Unit root tests, seeking mean or trend reversion, are frequently applied to panel data. We show that more powerful variants of commonly applied tests are readily available. Moreover, power gains persist when the modifications are applied to bootstrap procedures that may be employed when...

We examine the determinants of low income transitions using first-order Markov models that control for initial conditions effects (those found to be poor in the base year may be a non-random sample) and for attrition (panel retention may also be non-random). The model estimates, derived from...

This paper considers the dynamics of a categorical indicator of self-assessed health using eight waves (1991-1998) of the British Household Panel Survey (BHPS). Our analysis has three focal points: the relative contributions of state dependence and heterogeneity in explaining the dynamics of...

This paper relaxes some restrictions of previous twin-based estimates of the effects of education on earnings. First, it estimates the earnings premiums associated with different educational levels. Second, it estimates a piecewise linear relationship between the natural logarithm of annual...

Potential output plays a central role in monetary policy and short-term macroeconomic policy making. Yet, characterizing the output gap involves a trend-cycle decomposition, and unobserved component estimates are typically subject to a large uncertainty at the sample end. An important...

Individuals save for future uncertain health care expenses. This is less efficient than pooling health risk through insurance. The provision of comprehensive health insurance may raise welfare by providing the missing market to smooth out consumption through the life cycle. We employ a...