We discuss a new approach to specifying and estimating ordered probit models with endogenous switching, or with binary endogenous regressor, based on copula functions. These models provide a framework of analysis for self-selection in economic well-being equations, where assigment of regressors may be choice based, resulting from well-being maximization, rather than random. In an application to public and private sector job satisfaction, and using data on male workers from the German Socio-Economic Panel, we find that a model based on Frank's copula is preferred over two alternative models with independence and normal copula, respectively. The results suggest that public sector workers are negatively selected.
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Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers with number
135.
Find related papers by JEL classification: I31 - Health, Education, and Welfare - - Welfare and Poverty - - - General Welfare C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
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