Consistent estimation of the fixed effects ordered logit model

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, whereas some consistent and efficient estimators are available, including minimum distance and generalized method-...

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Bibliographic Details
Published in:Journal of the Royal Statistical Society. Series A, Statistics in society Statistics in society, 2015-06, Vol.178 (3), p.685-703
Main Authors: Baetschmann, Gregori, Staub, Kevin E., Winkelmann, Rainer
Format: Article
Language:English
Subjects:
Consistent estimators
Econometrics
Economic models
Estimation bias
Estimation methods
Estimators
Fixed effects
Generalized method of moments
Life satisfaction
Logistic regression
Mathematical models
Maximum likelihood estimators
Monte Carlo methods
Monte Carlo simulation
Ordered response data
Panel data
Plant closings
Plant closures
Quality of life
Socioeconomic factors
Socioeconomics
Statistical analysis
Subjective wellbeing
Unemployment
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Summary: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, whereas some consistent and efficient estimators are available, including minimum distance and generalized method-of-moment estimators. 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 efficient. An illustrative application based on data from the German Socio-Economic Panel confirms the large negative effect of unemployment on life satisfaction that has been found in the previous literature.
ISSN:0964-1998
1467-985X
DOI:10.1111/rssa.12090