Using Copulas to Model Switching Regimes with an Application to Child Labour* |
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Authors: | MURRAY D SMITH |
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Institution: | Econometrics and Business Statistics, The University of Sydney, Sydney, Australia |
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Abstract: | The copula approach to econometric modelling involves the specification of the separate components of the joint distribution of the random variables of interest: models built for each margin are bound together using a copula function. In this paper, the copula approach is used to construct models for switching regimes. The construct is illustrated by fitting a wage earnings model for child workers in the early 1900s, with regimes governed according to literacy. The results improve on earlier modelling efforts by Poirier and Tobias (2003), finding that a child worker may on average expect a reduction in earnings from being literate. |
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Keywords: | C51 C25 J24 |
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