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Consistent Estimation of the Fixed Effects Ordered Logit Model

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Author Info

  • Baetschmann, Gregori

    ()
    (University of Zurich)

  • Staub, Kevin

    ()
    (University of Zurich)

  • Winkelmann, Rainer

    ()
    (University of Zurich)

Abstract

The paper re-examines existing estimators for the panel data fixed effects ordered logit model, proposes a new one, and studies the sampling properties of these estimators in a series of Monte Carlo simulations. There are two main findings. First, we show that some of the estimators used in the literature are inconsistent, and provide reasons for the inconsistency. Second, the new estimator is never outperformed by the others, seems to be substantially more immune to small sample bias than other consistent estimators, and is easy to implement. The empirical relevance is illustrated in an application to the effect of unemployment on life satisfaction.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5443.

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Length: 35 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5443

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Related research

Keywords: ordered response; panel data; correlated heterogeneity; incidental parameters;

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References

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  1. Paul Frijters, 2005. "The causal effect of income on health: Evidence from German reunification," Paul Frijters Discussion Papers 2005-2, School of Economics and Finance, Queensland University of Technology.
  2. Paul Frijters & John P. Haisken-DeNew & Michael A. Shields, 2004. "Money Does Matter! Evidence from Increasing Real Income and Life Satisfaction in East Germany Following Reunification," American Economic Review, American Economic Association, vol. 94(3), pages 730-740, June.
  3. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, 07.
  4. Anna Cristina D'Addio & Tor Eriksson & Paul Frijters, 2007. "An analysis of the determinants of job satisfaction when individuals' baseline satisfaction levels may differ," Applied Economics, Taylor & Francis Journals, vol. 39(19), pages 2413-2423.
  5. AlisonL. Booth & JanC. vanOurs, 2008. "Job Satisfaction and Family Happiness: The Part-Time Work Puzzle," Economic Journal, Royal Economic Society, vol. 118(526), pages F77-F99, 02.
  6. Das, J.W.M. & Soest, A.H.O. van, 1996. "A Panel Data Model for Subjective Information on Household Income Growth," Discussion Paper 1996-75, Tilburg University, Center for Economic Research.
  7. Paul Frijters & John P. Haisken-DeNew & Michael A. Shields, 2004. "Investigating the Patterns and Determinants of Life Satisfaction in Germany Following Reunification," Journal of Human Resources, University of Wisconsin Press, vol. 39(3).
  8. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May.
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