A0409
Title: Testing for unobserved heterogeneity in censored duration models: EM approach
Authors: Hiroyuki Kasahara - University of British Columbia (Canada)
Hirokazu Matsuyama - Information Services International-Dentsu (Japan)
Katsumi Shimotsu - University of Tokyo (Japan) [presenting]
Shota Takeishi - University of Tokyo (Japan)
Abstract: The method proposed to use a likelihood-based modified EM statistic to test for unobserved heterogeneity in censored duration models. The level and power of the modified EM test are compared with the likelihood ratio test (LRT) proposed by other researchers, an information matrix (IM) test constructed previously, and the Lagrange multiplier (LM) tests through a series of Monte Carlo simulations. The simulations show that the modified EM test outperforms the LRT, IM, and LM tests except when the sample size is no smaller than 200.
