Attrition in panel survey data and the estimation of multi-state labor market models

In the analysis of labor market transitions. spells that are incomplete due to panel survey attrition are treated as spell that are subject to independent right-censoring. It is likely, however, that the unobserved characteristics affecting individual transitions on the labor market are related to those affecting the attitude toward survey participation. In that case, the transition rate estimates are inconsistent. In this paper we analyze the relation between durations spent in labor market states and the duration of panel survey participation, by explicitly modelling and estimating both stochastic processes. We use multi-state multi-spell models which allow for stochastically related unobserved determinants.