Heterogeneity in Ordered Choice Models: A Review with Applications to Self-Assessed Health

44 Pages Posted: 13 Jan 2014

See all articles by William H. Greene

William H. Greene

New York University Stern School of Business

Mark N. Harris

Curtin University

Bruce Hollingsworth

Lancaster University

Timothy Weterings

Monash University

Multiple version iconThere are 3 versions of this paper

Date Written: May 1, 2012

Abstract

Discrete variables that have an inherent sense of ordering across outcomes are commonly found in large datasets available to many economists, and are often the focus of research. However, assumptions underlying the standard Ordered Probit (which is usually used to analyse such variables) are not always justified by the data. This study provides a review of the ways in which the Ordered Probit might be extended to account for additional heterogeneity. Differing from other reviews in scope, application and relevance in economic settings, a series of issues pertaining to choices of variables, and the economic assumptions underlying each model are discussed in the context of measuring the underlying health of respondents. The models are applied to a wave of the Household, Income and Labour Dynamics in Australia survey, in order to check the appropriateness of such assumptions in an applied context.

Keywords: Ordered Choice Modelling, HOPIT model, Incorporating Heterogeneity, Maximum Likelihood, Self-Assessed Health

JEL Classification: C01, C52

Suggested Citation

Greene, William H. and Harris, Mark N. and Hollingsworth, Bruce and Weterings, Timothy, Heterogeneity in Ordered Choice Models: A Review with Applications to Self-Assessed Health (May 1, 2012). CRAE Research Paper No. 05052012. Available at SSRN: https://ssrn.com/abstract=2378131 or http://dx.doi.org/10.2139/ssrn.2378131

William H. Greene

New York University Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States
212-998-0876 (Phone)

HOME PAGE: http://people.stern.nyu.edu/wgreene

Mark N. Harris (Contact Author)

Curtin University ( email )

Kent Street
Bentley
Perth, WA WA 6102
Australia

HOME PAGE: http://business.curtin.edu.au/contact/staff_directory/?profile=Mark-Harris

Bruce Hollingsworth

Lancaster University ( email )

Lancaster LA1 4YX
United Kingdom

Timothy Weterings

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

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