Februar 2004

IZA DP No. 1016: Subjective Well-Being and the Family: Results from an Ordered Probit Model with Multiple Random Effects

published in: Empirical Economics, 2005, 30 (3), 749-761

The previous literature on the determinants of individual well-being has failed to fully account for the interdependencies in well-being at the family level. This paper develops an ordered probit model with multiple random effects that allows to identify the intrafamily correlation in well-being. The parameters of the model can be estimated with panel data using Maximum Marginal Likelihood. The approach is illustrated in an application using panel data for the period 1984-1997 from the German Socio-Economic Panel in which both inter-generational and intra-marriage correlations in well-being are estimated.