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Econometric Analysis of Ratings: With an Application to Health and Wellbeing

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  • Raphael Studer
  • Rainer Winkelmann

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

  • Raphael Studer & Rainer Winkelmann, 2016. "Econometric Analysis of Ratings: With an Application to Health and Wellbeing," SOEPpapers on Multidisciplinary Panel Data Research 846, DIW Berlin, The German Socio-Economic Panel (SOEP).
  • Handle: RePEc:diw:diwsop:diw_sp846
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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.
    2. Matthias Nübling & Hanfried H. Andersen & Axel Mühlbacher & Jürgen Schupp & Gert G. Wagner, 2007. "Computation of Standard Values for Physical and Mental Health Scale Scores Using the SOEP Version of SF12v2," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(1), pages 171-182.
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    4. Raphael Studer & Rainer Winkelmann, 2014. "Reported Happiness, Fast and Slow," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 117(3), pages 1055-1067, July.
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    6. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, July.
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    10. Yitzhaki, Shlomo, 1996. "On Using Linear Regressions in Welfare Economics," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(4), pages 478-486, October.
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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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