STATE DEPENDENCE AND HETEROGENEITY IN HEALTH USING A BIAS-CORRECTED FIXED-EFFECTS ESTIMATOR
Article first published online: 2 SEP 2012
Copyright © 2012 John Wiley & Sons, Ltd.
Journal of Applied Econometrics
Volume 29, Issue 2, pages 181–207, March 2014
How to Cite
Carro, J. M. and Traferri, A. (2014), STATE DEPENDENCE AND HETEROGENEITY IN HEALTH USING A BIAS-CORRECTED FIXED-EFFECTS ESTIMATOR. J. Appl. Econ., 29: 181–207. doi: 10.1002/jae.2301
- Issue published online: 7 MAR 2014
- Article first published online: 2 SEP 2012
- Manuscript Revised: 8 JUL 2012
- Manuscript Received: 14 JUL 2010
This paper estimates a dynamic ordered probit model of self-assessed health with two fixed effects: one in the linear index equation and one in the cut-points. This robustly controls for heterogeneity in unobserved health status and in reporting behavior, although we cannot separate both sources of heterogeneity. We find important state dependence effects, and small but significant effects of income and other socioeconomic variables. Having dynamics and flexibly accounting for unobserved heterogeneity matters for those estimates. We also contribute to the bias correction literature in nonlinear panel models by comparing and applying two of the existing proposals to our model. Copyright © 2012 John Wiley & Sons, Ltd.