A potential solution to problems in ordered choice models involving endogenous ordinal variables for self-reported questions
AbstractMost of the surveys in social sciences generally consist of ordinal variables. Sometimes researchers need to model behaviour of ordinal variables in simultaneous equation system involving many endogenous ordinal variables. This situation leads to a very complex likelihood function which is extremely hard to solve. The solutions suggested in the literature are even harder to understand by applied researchers. The present study suggests a simulation method to avoid this problem altogether by converting ordinal variables into continuous variables and use standard simultaneous regression models. The proposed method involves generating random numbers from continuous probability distributions (uniform and truncated normal distributions) within a discrete probability distribution. This method can be fruitfully be used in ordered logit and probit models. The limitations of this method are also discussed.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 44908.
Date of creation: 09 Mar 2013
Date of revision:
Endogenous Ordinal variables; Simultaneous Equation System; Ordered Logit; Ordered Probit.;
Find related papers by JEL classification:
- C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
- C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
- C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-16 (All new papers)
- NEP-DCM-2013-03-16 (Discrete Choice Models)
- NEP-ECM-2013-03-16 (Econometrics)
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