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Revisiting the evidence for cardinal treatment of ordinal variables

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  • Schröder, Carsten
  • Yitzhaki, Shlomo

Abstract

Well-being (life satisfaction or happiness) is a latent variable that is impossible to observe directly. Moreover, it does not have a unit of measurement. Hence, survey questionnaires usually ask people to rate their well-being in different domains. The common practice of comparing well-being by means of averages or linear regressions ignores the fact that well-being is an ordinal variable. Since data is ordinal, monotonic increasing transformations are permissible. We illustrate the sensitivity of empirical studies to monotonic transformations using examples that relate to well-known empirical papers, and provide two theoretical conditions that enable us to rank ordinal variables. In our examples, monotonic increasing transformations can in fact reverse the conclusion reached.

Suggested Citation

  • Schröder, Carsten & Yitzhaki, Shlomo, 2017. "Revisiting the evidence for cardinal treatment of ordinal variables," European Economic Review, Elsevier, vol. 92(C), pages 337-358.
  • Handle: RePEc:eee:eecrev:v:92:y:2017:i:c:p:337-358
    DOI: 10.1016/j.euroecorev.2016.12.011
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    Cited by:

    1. Eric Nielsen, 2019. "Test Questions, Economic Outcomes, and Inequality," Finance and Economics Discussion Series 2019-013, Board of Governors of the Federal Reserve System (U.S.).
    2. Kim, Seonghoon & Koh, Kanghyock, 2019. "The Effects of the Affordable Care Act Medicaid Expansion on Subjective Well-being," IZA Discussion Papers 12636, Institute of Labor Economics (IZA).
    3. Le-Yu Chen & Ekaterina Oparina & Nattavudh Powdthavee & Sorawoot Srisuma, 2019. "Have Econometric Analyses of Happiness Data Been Futile? A Simple Truth About Happiness Scales," Papers 1902.07696, arXiv.org.
    4. Hinz, Tina & Lechmann, Daniel S. J., 2019. "The role of job satisfaction and local labor market conditions for the dissolution of worker-job matches," Discussion Papers 109, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    5. Kaiser, Caspar & Vendrik, Maarten C. M., 2019. "How threatening are transformations of reported happiness to subjective wellbeing research?," SocArXiv gzt7a, Center for Open Science.
    6. Sophia Schmitz, 2020. "The Impact of Publicly Funded Childcare on Parental Well-Being: Evidence from Cut-Off Rules," European Journal of Population, Springer;European Association for Population Studies, vol. 36(2), pages 171-196, April.
    7. Carsten Schroeder & Shlomo Yitzhaki, 2020. "Exploring the robustness of country rankings by educational attainment," Journal of Economics, Springer, vol. 129(3), pages 271-296, April.
    8. Georg F. Camehl & C. Katharina Spieß & Kurt Hahlweg, 2019. "Short- and Mid-Term Effects of a Parenting Program on Maternal Well-Being: Evidence for More and Less Advantaged Mothers," SOEPpapers on Multidisciplinary Panel Data Research 1062, DIW Berlin, The German Socio-Economic Panel (SOEP).
    9. Camehl, Georg & Hahlweg, Kurt & Spieß, C. Katharina, 2018. "The Effects of a Parenting Program on Maternal Well-Being: Evidence from a Randomized Controlled Trial," Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181583, Verein für Socialpolitik / German Economic Association.
    10. Lara Cockx, 2019. "Moving Towards a Better Future? Migration and Children's Health and Education," LICOS Discussion Papers 41119, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    11. Vahan Sargsyan, 2018. "Social Integration of Immigrants and the Attitude of the Native Population in European Countries," CERGE-EI Working Papers wp629, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    12. Carol Graham, 2005. "The Economics of Happiness," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 6(3), pages 41-55, July.

    More about this item

    Keywords

    C18; C23; C25; I30; I31; I39; Satisfaction; Well-being; Ordinal; Cardinal; Dominance;

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • 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; Probabilities
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • I39 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Other

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