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State dependence and heterogeneity in health using a bias corrected fixed effects estimator

  • Jesús M. Carro

    ()

  • Alejandra Traferri

    ()

This paper considers the estimation of a dynamic ordered probit of self-assessed health status with two fixed effects: one in the linear index equation and one in the cut points. The two fixed effects allow us to robustly control for heterogeneity in unobserved health status and in reporting behaviour, even though we can not separate both sources of heterogeneity. The contributions of this paper are twofold. First it contributes to the literature that studies the determinants and dynamics of Self-Assessed Health measures. Second, this paper contributes to the recent literature on bias correction in nonlinear panel data models with fixed effects by applying and studying the finite sample properties of two of the existing proposals to our model. The most direct and easily applicable correction to our model is not the best one, and has important biases in our sample sizes

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File URL: http://e-archivo.uc3m.es/bitstream/10016/11813/1/we1118.pdf
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Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we1118.

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Date of creation: May 2011
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Handle: RePEc:cte:werepe:we1118
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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, 06.
  2. Hahn, Jinyong & Kuersteiner, Guido, 2011. "Bias Reduction For Dynamic Nonlinear Panel Models With Fixed Effects," Econometric Theory, Cambridge University Press, vol. 27(06), pages 1152-1191, December.
  3. Timothy J. Halliday, 2007. "Heterogeneity, State Dependence and Health," Working Papers 200716, University of Hawaii at Manoa, Department of Economics.
  4. Paul Contoyannis & Andrew M. Jones & Nigel Rice, 2004. "The dynamics of health in the British Household Panel Survey," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(4), pages 473-503.
  5. Rilstone, Paul & Srivastava, V. K. & Ullah, Aman, 1996. "The second-order bias and mean squared error of nonlinear estimators," Journal of Econometrics, Elsevier, vol. 75(2), pages 369-395, December.
  6. Bester, C. Alan & Hansen, Christian, 2009. "A Penalty Function Approach to Bias Reduction in Nonlinear Panel Models with Fixed Effects," Journal of Business & Economic Statistics, American Statistical Association, vol. 27(2), pages 131-148.
  7. Lindeboom, Maarten & van Doorslaer, Eddy, 2004. "Cut-point shift and index shift in self-reported health," Journal of Health Economics, Elsevier, vol. 23(6), pages 1083-1099, November.
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