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Econometric Analysis of Ratings - with an Application to Health and Wellbeing

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  • Rainer Winkelmann
  • Raphael Studer

Abstract

We propose a new non-linear regression model for rating dependent variables. The rating scale model accounts for the upper and lower bounds of ratings. Parametric and semi-parametric estimation is discussed. An application investigates the relationship between stated health satisfaction and physical and mental health scores derived from self-reports of various health impairments, using data from the German Socio-Economic Panel. We compare our new approach to modeling ratings with ordinary least squares (OLS). In one specification, OLS average effects exceed that from our rating scale model by up to 50 percent. Also, OLS in-sample mean predictions violate the upper bound of the dependent variable in a number of cases.

Suggested Citation

  • Rainer Winkelmann & Raphael Studer, 2017. "Econometric Analysis of Ratings - with an Application to Health and Wellbeing," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 153(I), pages 1-13, March.
  • Handle: RePEc:ses:arsjes:2017-i-1
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    References listed on IDEAS

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    1. Andrew M. Jones & Stefanie Schurer, 2011. "How does heterogeneity shape the socioeconomic gradient in health satisfaction?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(4), pages 549-579, June.
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    More about this item

    Keywords

    Quasi maximum likelihood; bounded dependent variable; German Socio-Economic Panel;

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • I10 - Health, Education, and Welfare - - Health - - - General

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