Bernard M.S. van Praag () (Universiteit van Amsterdam, CESifo, IZA, & SCHOLAR) Ada Ferrer-i-Carbonell () (Universiteit van Amsterdam, SCHOLAR, AIAS Amsterdam Institute of Labour Studies)
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In this paper we propose an alternative approach to the estimation of ordered response models. We show that the Probit-method may be replaced by a simple OLS-approach, called P(robit)OLS, without any loss of efficiency. This method can be generalized to the analysis of panel data. For large-scale examples with random fixed effects we found that computing time was reduced from 90 minutes to less than one minute. Conceptually, the method removes the gap between traditional multivariate models and discrete variable models
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Find related papers by JEL classification: C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
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