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st: modeling contract duration


From   "Franken, Jason R." <frankenj@missouri.edu>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: modeling contract duration
Date   Wed, 1 Jul 2009 10:28:19 -0500

I want to model contract duration as a function of several firm and industry characteristics.  Prior work suggests a truncation issue that I'm not sure how to address in STATA.  Crocker and Masten (1988, p. 339) and Joskow (1987, p. 178) cite Maddala's (1983, p. 165-170) discussion of maximum likelihood estimation for a truncated dependent variable for which observations above a certain value were eliminated from the dataset. (URLs to references below)

 

In my case, the contract data was recorded in 2006.  Contract duration varies between 1 and 10 years.  Consider the contract with a duration of 10 years.  Potentially, other contracts of shorter duration (say 3 years) may have been signed in the same year as this 10 year contract, but I have no record of them.  Yet, I do have record of contracts with three years duration signed in 2004 and 2005, for example.  In this sense, the sample is truncated, but this seems different than just truncating all zero observations (using -truncreg- to account for observations of no contract)?

 

Is anyone aware of a user-written program for this type of truncation?

 

Thanks in advance!

 

Jason Franken

 

 

References:

Crocker and Masten (1988) Mitigating Contractual Hazards: Unilateral Options and Contract Length

(http://www.jstor.org/stable/pdfplus/2555660.pdf <http://www.jstor.org/stable/pdfplus/2555660.pdf> )

 

Joskow (1987) Contract Duration and Relationship-Specific Investments: Empirical Evidence from Coal Markets http://links.jstor.org/sici?sici=0002-8282%28198703%2977%3A1%3C168%3ACDARIE%3E2.0.CO%3B2-H <http://links.jstor.org/sici?sici=0002-8282%28198703%2977%3A1%3C168%3ACDARIE%3E2.0.CO%3B2-H> 

(http://www.jstor.org/stable/pdfplus/1806736.pdf <http://www.jstor.org/stable/pdfplus/1806736.pdf> )

 

Maddala (1983)

http://books.google.com/books?hl=en&lr=&id=-Ji1ZaUg7gcC&oi=fnd&pg=PR11&dq=Maddala+(1983)+limited+dependent+and+quali&ots=7d2o6EjTJM&sig=77sA4nJ7g5xQ6kzZMJHAkVjIVMI#PPA170,M1 <http://books.google.com/books?hl=en&lr=&id=-Ji1ZaUg7gcC&oi=fnd&pg=PR11&dq=Maddala+(1983)+limited+dependent+and+quali&ots=7d2o6EjTJM&sig=77sA4nJ7g5xQ6kzZMJHAkVjIVMI#PPA170,M1> 

 

 


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