Estimating Endogenous Ordered Response Panel Data Models with an Application to Income Gradient in Child Health

39 Pages Posted: 9 Dec 2019

See all articles by Kajal Lahiri

Kajal Lahiri

State University of New York (SUNY) at Albany, College of Arts and Sciences, Economics

Liu Yang

Nanjing University - School of Business; State University of New York (SUNY) at Albany, College of Arts and Sciences, Economics

Date Written: November 22, 2019

Abstract

In this paper, a control function approach is developed to deal with endogeneity issue in estimating panel data models with ordered response. This methodology is characterized by a two-step procedure, requiring only standard regression to be implemented in each step. To demonstrate the usefulness of our method, we investigate income gradient in child health based on U.S. data from the Panel Study of Income Dynamics. We find empirical evidence that income gradient rises during early childhood, followed by a decline after age 12. Ignoring endogeneity of family income and unobserved individual heterogeneity would underestimate the true gradient considerably.

Keywords: Control function, Panel data, Endogeneity, Ordered response, Income gradient, Child health

JEL Classification: C01, C13, C33, C35, C36, I10

Suggested Citation

Lahiri, Kajal and Yang, Liu, Estimating Endogenous Ordered Response Panel Data Models with an Application to Income Gradient in Child Health (November 22, 2019). Available at SSRN: https://ssrn.com/abstract=3491547 or http://dx.doi.org/10.2139/ssrn.3491547

Kajal Lahiri (Contact Author)

State University of New York (SUNY) at Albany, College of Arts and Sciences, Economics ( email )

Department of Economics
1400 Washington Avenue
Albany, NY 12222
United States
518-442 4758 (Phone)
518-442 4736 (Fax)

HOME PAGE: http://www.albany.edu/~klahiri

Liu Yang

Nanjing University - School of Business

22 Hankou Road
Nanjing, Jiangsu 210093 210093
China

State University of New York (SUNY) at Albany, College of Arts and Sciences, Economics ( email )

1400 Washington Ave
Albany, NY 12222
United States
518-442-4735 (Phone)
518-442-4736 (Fax)

HOME PAGE: http://www.albany.edu/economics/

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