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Using Copulas to Model Switching Regimes with an Application to Child Labour *
Author(s) -
SMITH MURRAY D.
Publication year - 2005
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.2005.00246.x
Subject(s) - copula (linguistics) , earnings , econometrics , economics , wage , marginal distribution , construct (python library) , joint probability distribution , random variable , computer science , mathematics , statistics , labour economics , accounting , programming language
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.