xtdhazard and cfbinout: Using internal instruments for addressing unobserved heterogeneity in the discrete-time hazard model

Abstract

In this article, we introduce the new community-contributed commands xtdhazard and cfbinout. The former implements the own-differences instrumental-variables estimator proposed by Farbmacher and Tauchmann (2023, Econometric Reviews 42: 635-654) for dealing with time-invariant unobserved heterogeneity in the discrete-time hazard model. cfbinout is called by xtdhazard if a nonlinear discrete-time hazard model is specified. cfbinout can also be used as a standalone command that generalizes ivprobit, twostep by allowing discrete endogenous regressors and link functions that are different from the normal link, specifically logit and complementary log-log. In terms of the underlying econometric theory, cfbinout is guided by Wooldridge (2015, Journal of Human Resources 50: 420-445). We illustrate the use of xtdhazard in an empirical example.