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Reconsidering the analysis of longitudinal happiness data - with an application to the effect of unemployment

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Author Info

  • Gregori Baetschmann
  • Kevin E. Staub
  • Rainer Winkelmann

Abstract

The 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 Info

Paper provided by Department of Economics - University of Zurich in its series ECON - Working Papers with number 004.

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Date of creation: Jan 2011
Date of revision: Jun 2011
Handle: RePEc:zur:econwp:004

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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. Booth, Alison L & van Ours, Jan C, 2007. "Job Satisfaction and Family Happiness: The Part-time Work Puzzle," CEPR Discussion Papers 6471, C.E.P.R. Discussion Papers.
  3. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May.
  4. repec:ese:iserwp:2007-20 is not listed on IDEAS
  5. Das, Marcel & van Soest, Arthur, 1999. "A panel data model for subjective information on household income growth," Journal of Economic Behavior & Organization, Elsevier, vol. 40(4), pages 409-426, December.
  6. Ada Ferrer-i-Carbonell & Paul Frijters, 2002. "How important is Methodology for the Estimates of the Determinants of Happiness?," Tinbergen Institute Discussion Papers 02-024/3, Tinbergen Institute.
  7. 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.
  8. Anna Cristina D’Addio & Tor Eriksson & Paul Frijters, 2003. "An Analysis of the Determinants of Job Satisfaction when Individuals’ Baseline Satisfaction Levels May Differ," CAM Working Papers 2003-16, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  9. 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).
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Cited by:
  1. Bell, David N.F. & Otterbach, Steffen & Sousa-Poza, Alfonso, 2011. "Work Hours Constraints and Health," IZA Discussion Papers 6126, Institute for the Study of Labor (IZA).
  2. Christoph Ehlert & Sandra Schaffner, 2011. "Health Effects of Temporary Jobs in Europe," Ruhr Economic Papers 0295, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  3. Robert Rudolf & Sung-Jin Kang, 2011. "Adaptation under Traditional Gender Roles: Testing the Baseline Hypothesis in South Korea," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 101, Courant Research Centre PEG.

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