Reconsidering the analysis of longitudinal happiness data - with an application to the effect of unemployment
AbstractThe paper reconsiders existing estimators for the panel data fixed effects ordered logit model, including one that has not been used in econometric studies before, and studies the small sample 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. Second, the new estimator seems to be 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 happiness. Choosing the right estimator avoids a bias of up to 30 percent in key parameters.
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Bibliographic InfoPaper provided by Department of Economics - University of Zurich in its series ECON - Working Papers with number 004.
Date of creation: Jan 2011
Date of revision: Jun 2011
Ordered response; panel data; correlated heterogeneity; incidental parameters;
Find related papers by JEL classification:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
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