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Econometric Analysis of Ratings - with an Application to Health and Wellbeing

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  • Rainer Winkelmann
  • Raphael Studer

Abstract

We propose a new non-linear regression model for rating dependent variables. The rating scale model accounts for the upper and lower bounds of ratings. Parametric and semi-parametric estimation is discussed. An application investigates the relationship between stated health satisfaction and physical and mental health scores derived from self-reports of various health impairments, using data from the German Socio-Economic Panel. We compare our new approach to modeling ratings with ordinary least squares (OLS). In one specification, OLS average effects exceed that from our rating scale model by up to 50 percent. Also, OLS in-sample mean predictions violate the upper bound of the dependent variable in a number of cases.

Suggested Citation

  • Rainer Winkelmann & Raphael Studer, 2017. "Econometric Analysis of Ratings - with an Application to Health and Wellbeing," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 153(I), pages 1-13, March.
    • Handle: RePEc:ses:arsjes:2017-i-1
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    Cited by:

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    2. Annika Luisa Hofmann & Miguel Ferreira & João Lampreia, 2017. "Case Study: DBRS Sovereign Rating of Portugal. Analysis of Rating Methodology and Rating Decisions," GEE Papers 0073, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Jul 2017.
    3. Anil Özdemir & Helmut Dietl & Giambattista Rossi & Robert Simmons, 2020. "Are Workers Rewarded for Inconsistent Performance?," Working Papers 386, University of Zurich, Department of Business Administration (IBW).
    4. Swain, Swadhina Shikha & Mishra, Pulak, 2021. "How does cleaner energy transition influence standard of living and natural resources conservation? A study of households’ perceptions in rural Odisha, India," Energy, Elsevier, vol. 215(PB).
    5. Stefano Costa & Federico Sallusti & Claudio Vicarelli & Davide Zurlo, 2022. "From Micro to Macro: Micro-Foundations of the Italian Business Cycle Co-movements During the Crises," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 8(3), pages 499-522, November.

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    More about this item

    Keywords

    Quasi maximum likelihood; bounded dependent variable; German Socio-Economic Panel;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • I10 - Health, Education, and Welfare - - Health - - - General

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