Abstract
The paper considers panel data methods for estimating ordered logit models with individual-specific correlated unobserved heterogeneity. We show that a popular approach is inconsistent, while a number of consistent and effcient estimators are available, including minimum distance and GMM. A Monte Carlo study reveals the good properties of an alternative estimator that has not been considered in econometric applications before, is simple to implement and almost as eficient. An illustrative application based on data from the German Socio-Economic Panel confirms the large negative effect of unemployment on life satisfaction found in the previous literature.
Baetschmann, Gregori