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


Baetschmann, Gregori; Staub, Kevin E; Winkelmann, Rainer (2011). Reconsidering the analysis of longitudinal happiness data - with an application to the effect of unemployment. Working paper series / Department of Economics No. 4, University of Zurich.

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.

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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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:C23, C25, J28, J64
Uncontrolled Keywords:Ordered response, panel data, correlated heterogeneity, incidental parameters
Language:English
Date:June 2011
Deposited On:15 Feb 2012 13:21
Last Modified:05 Apr 2016 15:37
Series Name:Working paper series / Department of Economics
Number of Pages:36
ISSN:1664-7041
Additional Information:Revised version
Official URL:http://www.econ.uzh.ch/static/wp/econwp004.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php

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