| Abstract: | An overview is presented of some parametric and semi-parametric models, estimators, and specification tests that can be used to analyze ordered response variables. In particular, limited dependent variable models that generalize ordered probit are compared to regression models that generalize the linear model. These techniques are then applied to analyze how self-reported satisfaction with household income relates to household income, family composition, and other background variables. Data are drawn from the 1998 wave of the German Socio-Economic Panel. The results are used to estimate equivalence scales and the cost of children. We find that the standard ordered probit model is rejected, while some semi-parametric specifications survive specification tests against nonparametric alternatives. The estimated equivalence scales, however, are often similar for the parametric and semi-parametric specifications.JEL Classification:
C14, C35, D12Correspondence to: Charles BellemareWe are grateful to an anonymous referee and to participants of a CeMMAP/ESG workshop at University College London and seminars at CentER (Tilburg University) and Humboldt University Berlin for useful comments. |
