Bayesian Dynamic Panel-Ordered Probit Model with Individual Heterogeneity

Recent studies have suggested incorporating individual heterogeneity in the ordered choice models. This study proposes a new Bayesian model with individual heterogeneity in the dynamic panel-ordered probit model, which is the first attempt to capture individual heterogeneity for panel ordinal responses. The validity and accuracy of the newly proposed model are evaluated using simulated data. We further compare standard and individual heterogeneity models in analyzing subjective well-being in China, using panel data from the China Family Panel Studies. The empirical results demonstrate that the newly proposed model can measure the individual heterogeneity for panel ordinal responses fairly well.