An almost integration-free approach to ordered response models

Bernard M.S. Van Praag (Tinbergen Institute, CESifo, IZA, & SCHOLAR, Faculty of Economics and Econometrics University of Amsterdam) and Ada Ferrer-i-Carbonell (SCHOLAR, AIAS Amsterdam Institute of Labour Studies, & Tinbergen Institute Faculty of Economics and Econometrics University of Amsterdam)

In this paper we propose an alternative approach to the estimation of ordered response models. We show that the Probit-method may be replaced by a simple OLS-approach, called P(robit)OLS, without any loss of efficiency. This method can be generalized to the analysis of panel data. For large-scale examples with random fixed effects we found that computing time was reduced from 90 minutes to less than one minute. Conceptually, the method removes the gap between traditional multivariate models and discrete variable models.

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Year of publication:	19 April 2006
Authors:	Praag, Bernard M. S. van ; Ferrer-i-Carbonell, Ada
Publisher:	Amsterdam : Tinbergen Institute
Subject:	Categorical data \| Ordered probit model \| Ordered response models \| Subjective data \| Subjective well-being \| Probit-Modell \| Probit model \| Schätztheorie \| Estimation theory \| Zufriedenheit \| Satisfaction \| Schätzung \| Estimation \| Regressionsanalyse \| Regression analysis \| Deutschland \| Germany \| Qualitative Methode \| Qualitative method