Measurement Error Bias Reduction in Unemployment Durations

The impact of duration response measurement error is investigatedby using small variance approximations. The inconsistency of GMMestimators that ignore measurement error is studied for both single spell modelswith right censoring, and for a two spell lagged duration dependence model.The results suggest a corrected GMM estimator for the error free and measurementerror distributions. When the error free density is known, identification isachieved by using the moment condition that defines the measurement error sensitivespecification score test. The results are applied to unemployment durationdata from the BHPS.