samlet årgang - Økonomisk Institut - Københavns Universitet

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NATIONALØKONOMISK TIDSSKRIFT 2005. NR. 3
Identification of the correlation between the unobservable components is obtained
through multiple occurrences of both marriage spells and premarital cohabitation status
for the individuals, as suggested by identification results for duration models with
multiple spells, cf. Honoré (1993). This identification approach has been used in a
series of papers by Lillard and co-authors (see e.g., Panis and Lillard (1994), Lillard et
al. (1995), and Upchurch et al. (2002)). Identification requires that I – for at least a
subset of individuals – observe marriage spells both when the individual premaritally
cohabited and when the individual did not. The intuition for identification is spelled
out in Panis (2004). In terms of our application, his argument goes as follows: suppose
I observe only one respondent over a long period of time during which she switches
premarital cohabitation status. With a sample of one, there is no heterogeneity and no
correlation across equations, such that the equations are independent. The effect of
premarital cohabitation on exit rates from marriage is identified because of repeated
observations on marriage spells and variations in premarital cohabitation status. More
generally, conditional on heterogeniety, the equations are independent and identification
rests on repeated outcomes with intraperson variation in premarital cohabitation
status. In terms of intraperson variation in premarital cohabitation status 4% of the individuals
in the sample are observed both as premarital cohabitators and not. Obviously,
basing identification on 4% of the sample is not the most attractive nor powerful
identification strategy. The author of this article were, however, not able to come up
with an instrument that could explain premarital cohabitation and at the same time not
influence divorce decisions.
5. Results
In Table 5.1 I report the maximum likelihood estimates for the parameters of the
estimated model. Since I only observe that a divorce has occurred sometime within a
given year, I use explanatory variables or time t - 1 to explain the divorce hazard at
time t in order to avoid that the value of a given characteristic is influenced by the
divorce event.
Compared to Svarer (2004) I pay more attention to the possible endogeneity of premarital
cohabitation in the divorce hazard. This is, however, not the only potential
endogenous variable. Several of the included explanatory variables face the same issue
of endogeneity. Weiss and Willis (1997) provide evidence of this with respect to earnings,
Johnson and Skinner (1986) with respect to female labour supply, Lillard and
Waite (1993) with respect to children, and Lillard and Panis (1996) with respect to
health. The endogeneity problem of other variables than cohabitation will not be explicitly
addressed in the empirical model. However, I keep the endogeneity issues in
mind when drawing inference.