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A Latent Variable Mimic Approach To Inferring The Quality Of Life

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  • Rahman, Tauhidur
  • Mittelhammer, Ronald C.
  • Wandschneider, Philip R.

Abstract

This paper makes three principal contributions. First, we propose a new estimator for the unobservable variable models with endogenous causes. We show that under factor analysis type of assumptions, Robinson and Ferrara (1977)'’s procedure is not fully efficient, and a more efficient procedure can be obtained by merging Robinson and Ferrara'’ procedure with that in Joreskog and Goldberger (1975) procedure. The asymptotic properties of the new estimator are compared with these two estimators and results indicate that, with our mixture approach, significant efficiency gains can be achieved. Second, we model the Quality of life (QOL) as an unobservable or latent link variable between observable causes and observable effects, which mitigates problem of bias, inconsistency, and arbitrary weightings of explanatory factors. Third, we estimate and compare QOL indices for 43 countries for the year 1990s, noting differences between countries and over time.

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Bibliographic Info

Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2004 Annual meeting, August 1-4, Denver, CO with number 20351.

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Date of creation: 2004
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Handle: RePEc:ags:aaea04:20351

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Keywords: Research Methods/ Statistical Methods;

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  1. Zellner, Arnold, 1970. "Estimation of Regression Relationships Containing Unobservable Independent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 11(3), pages 441-54, October.
  2. Fine, B & Fine, K, 1974. "Social Choice and Individual Rankings II," Review of Economic Studies, Wiley Blackwell, vol. 41(4), pages 459-75, October.
  3. Desai, Meghnad, 1991. "Human development : Concepts and measurement," European Economic Review, Elsevier, vol. 35(2-3), pages 350-357, April.
  4. M. L. Weitzman, 1974. "On the Welfare Significance of National Product in Dynamic Economy," Working papers 125, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. Robinson, P M, 1974. "Identification, Estimation and Large-Sample Theory for Regressions Containing Unobservable Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(3), pages 680-92, October.
  6. Srinivasan, T N, 1994. "Human Development: A New Paradigm or Reinvention of the Wheel?," American Economic Review, American Economic Association, vol. 84(2), pages 238-43, May.
  7. D. N. Rao & R. L. Bhat, 1991. "Estimation of A Community Health Status Index on the Basis of a MIMIC Model," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 26(1), pages 51-63, January.
  8. Asheim, Geir B, 1997. " Adjusting Green NNP to Measure Sustainability," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(3), pages 355-70, September.
  9. Ravallion, Martin, 1997. "Good and bad growth: The human development reports," World Development, Elsevier, vol. 25(5), pages 631-638, May.
  10. Hartwick, John M, 1994. " National Wealth and Net National Product," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(2), pages 253-56.
  11. R. M. Solow, 1973. "Intergenerational Equity and Exhaustable Resources," Working papers 103, Massachusetts Institute of Technology (MIT), Department of Economics.
  12. Ram, Rati, 1982. "Composite indices of physical quality of life, basic needs fulfilment, and income : A principal component representation," Journal of Development Economics, Elsevier, vol. 11(2), pages 227-247, October.
  13. Goldberger, Arthur S, 1972. "Maximum-Likelihood Estimation of Regressions Containing Unobservable Independent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(1), pages 1-15, February.
  14. Van Vliet, ReneC. J. A. & Van Praag, Bernard M. S., 1987. "Health status estimation on the basis of MIMIC-health care models," Journal of Health Economics, Elsevier, vol. 6(1), pages 27-42, March.
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