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A Dynamic Ordered Logit Model with Fixed Effects

Chris Muris (), Pedro Raposo () and Sotiris Vandoros

Department of Economics Working Papers from McMaster University

Abstract: We study a fixed-T panel data logit model for ordered outcomes that accommodates fixed effects and state dependence. We provide identification results for the autoregressive parameter, regression coefficients, and the threshold parameters in this model. Our results require only four observations on the outcome variable. We provide conditions under which a composite conditional maximum likelihood estimator is consistent and asymptotically normal. We use our estimator to explore the determinants of self-reported health in a panel of European countries over the period 2003-2016. We find that: (i) that the autoregressive parameter is positive and analogous to a linear AR(1) coefficient of about 0.25, indicating persistence in health status; (ii) that the association between income and health becomes insignicant once we control for unobserved heterogeneity and persistence.

Keywords: panel data; ordered choice; health satisfaction (search for similar items in EconPapers)
JEL-codes: C23 C25 I14 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2020-08
New Economics Papers: this item is included in nep-dcm and nep-ecm
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Working Paper: A dynamic ordered logit model with fixed effects (2020) Downloads
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