The Wooldridge Method for the Initial Values Problem Is Simple: What About Performance?

The Wooldridge method is based on a simple and novel strategy to deal with the initial values problem in the nonlinear dynamic random-effects panel data models. This characteristic of the method makes it very attractive in empirical applications. However, its finite sample performance is not known as of yet. In this paper we investigate the performance of this method in comparison with an ideal case in which the initial values are known constants, the worst scenario based on exogenous initial values assumption, and the Heckman's reduced-form approximation method which is widely used in the literature. The dynamic random-effects probit and tobit (type1) models are used as the working examples. Various designs of Monte Carlo Experiments with balanced and unbalanced panel data sets, and also two full length empirical applications are provided. The results suggest that the Wooldridge method works very well for the panels with moderately long durations (longer than 5-8 periods). In short panels Heckman's reduced-form approximation is suggested (shorter than 5 periods). It is also found that all methods perform equally well for panels of long durations (longer than 10-15 periods).initial values problem, dynamic probit and tobit models, Monte Carlo experiment, Heckman's reduced-form approximation, Wooldridge method

Sundays Are Blue: Aren’t They? The Day-of-the-Week Effect on Subjective Well-Being and Socio-Economic Status

This paper analyses whether individuals are influenced by the day of the week when reporting subjective well-being. By using a large panel data set and controlling for observed and unobserved individual characteristics, we find a large day-of the-week effect. Overall, we find a 'blue' Sunday effect with the lowest level of subjective well-being. The day-of-the-week effect differs with certain socio-economic and demographic factors such as employment, marital status and age. The paper concludes with recommendations for future analyses of subjective well-being data and design of data collections.subjective well-being, day-of-the-week effect

The Persistence of Informality: Evidence from Panel Data

Informality is a growing phenomenon in the developing and transition country labor market context. In particular, it is noticeable that working in an informal employment relationship is often not temporary. The degree of persistence of informality in the labor market might be due to different sources: structural state dependence due to past informality experiences and spurious state dependence due to time-invariant unobserved individual effects, which can alter the propensity of being in the informal sector independently from actual informality experiences. The purpose of our paper is to study the dynamics of informality using a genuine panel data set in the Ukrainian labor market. By estimating a dynamic panel data probit model with endogenous initial conditions, we find a highly significant degree of persistence due to previous informality experiences. This result implies that policies attempting to reduce current levels of informality may have a long-lasting effect on the labor market.unobserved heterogeneity, state dependence, transition countries, informality

Does Relative Income Matter for the Very Poor? Evidence from Rural Ethiopia

We studied whether relative income has an impact on subjective well-being among extremely poor people. Contrary to the findings in developed countries, where relative income has shown a significant and negative impact on subjective well-being, we cannot reject the hypothesis that relative income has no impact on subjective well-being in rural areas of northern Ethiopia.absolute income, relative income, subjective well-being

Dynamics of the Employment Assimilation of First-Generation Immigrant Men in Sweden: Comparing Dynamic and Static Assimilation Models with Longitudinal Data

We analyse the dynamics of employment assimilation of first-generation immigrant men in Sweden using a high-quality, register-based panel data set. It is discussed that when there are significant differences between employment status persistence of immigrants and natives, the standard static assimilation model produces biased predictions for the relative labour market outcomes for immigrants. We find significant persistence of employment status which differs between immigrants and natives, and also across immigrant groups. The static assimilation model overestimates (underestimates) the short-run (long-run) marginal assimilation rates. We find 10-15 percentage points lower initial employment probability disadvantage but the years to assimilation are 5-10 years longer compared to the standard static assimilation model.dynamic random-effects probit model, employment assimilation, initial values problem

The Effect of Religiosity and Religious Festivals on Positional Concerns: An Experimental Investigation of Ramadan

This paper examines the effect of religion on positional concerns using survey experiments. We focus on two of the dimensions of religion – degree of religiosity and religious festivals. By conducting the experiments during both the most important day of Ramadan (the Night of Power) and a day outside Ramadan, we find that Ramadan overall has a small and negative impact on positional concerns. Detailed analyses based on the sorting of individuals' degree of religiosity reveal that the decrease in the degree of positional concerns during Ramadan is mainly explained by a decrease in positionality among individuals with a low degree of religiosity. We also discuss the broader welfare implications of our findings.religion, positional concerns, Ramadan, Islam

Does Relative Position Matter in Poor Societies? Evidence from a Survey Experiment in Rural Ethiopia

We investigated attitudes toward positionality among rural farmers in northern Ethiopia, using a tailored two-part survey experiment. On average, we found positional concerns neither in income per se, nor in income from aid projects among the farmers. These results support the claim that positional concerns are correlated with absolute level of income of a country.Ethiopia, relative income, positional concern

The Effect of Power Outages and Cheap Talk on Willingness to Pay to Reduce Outages

Using an open-ended contingent valuation survey, we analyze how (i) experience of a power outage due to one of the worst storms ever to hit Sweden and (ii) a cheap talk script affect respondents' WTP to avoid power outages. Experience significantly increases and a cheap talk script decreases the proportion of respondents with zero WTP. There is no significant effect in either case on stated WTP conditional on a positive WTP. The paper concludes with a discussion on the use of valuation studies shortly after the occurrence of an undesirable event.contingent valuation, cheap talk, experience, power outages

Relative Concerns of Rural-to-Urban Migrants in China

How the income of "relevant others" affects well-being has received renewed interest in the recent literature using subjective data. Migrants constitutes a par- ticularly interesting group to study this question: as they changed environment, they are likely to be concerned by several potential reference groups including the people "left behind", other migrants and "natives". We focus here on the huge population of rural-to-urban migrants in China. We exploit a novel dataset that comprises samples of migrants and urban people living in the same cities, as well as rural households mostly surveyed in the provinces where migrants are coming from. After establishing these links, we find that the well-being of migrants is largely af- fected by relative concerns: results point to negative relative concerns toward other migrants and workers of home regions - this status effect is particularly strong for migrants who wish to settle permanently in cities. We find in contrast a positive relative income effect vis-à-vis the urban reference group, interpreted as a signal effect - larger urban incomes indicate higher income prospects for the migrants. A richer pattern is obtained when sorting migrants according to the duration of stay, expectations to return to home countries and characteristics related to family cir- cumstances, work conditions and community ties.china, relative concerns, well-being

Relative Concerns of Rural-to-Urban Migrants in China

How the income of "relevant others" a¤ects well-being has received renewed interest in the recent literature using subjective data. Migrants constitutes a particularly interesting group to study this question: as they changed environment, they are likely to be concerned by several potential reference groups including the people "left behind", other migrants and "natives". We focus here on the huge population of rural-to-urban migrants in China. We exploit a novel dataset that comprises samples of migrants and urban people living in the same cities, as well as rural households mostly surveyed in the provinces where migrants are coming from. After establishing these links, we ?nd that the well-being of migrants is largely affected by relative concerns: results point to negative relative concerns toward other migrants and workers of home regions ?this status e¤ect is particularly strong for migrants who wish to settle permanently in cities. We ?nd in contrast a positive relative income e¤ect vis-à-vis the urban reference group, interpreted as a signal e¤ect: larger urban incomes indicate higher income prospects for the migrants. A richer pattern is obtained when sorting migrants according to the duration of stay, expectations to return to home countries and characteristics related to family circumstances, work conditions and community ties.China; relative concerns; well-being