### Abstract

We examine the effects of the Basic Elder Pension (BEP) in Korea on self-assessed health for the elderly of age 65 or higher, using two wave Korean panel data. As there could be innately healthy/optimistic individuals, it is important to allow for time-constant individual effects possibly related to regressors, which is, however, difficult as the dependent variable takes on four ordered categories. To overcome this difficulty, we transform the ordered discrete response into binary, and apply Panel Conditional Logit Estimator (PCLE) to the binary model. Since there are three ways to transform four ordered categories into binary, we obtain three PCLE's in total. To impose the restriction that the same parameters are estimated in those PCLE's, we use minimum distance estimator. We find that BEP has a small positive effect that is significant: 100% increment in BEP would result in an increment of 3-7% of 'one standard deviation of the latent continuous health propensity'. Finding a small effect might be natural, as improving health for the elderly would be a hard thing to do.

Original language | English |
---|---|

Pages (from-to) | 193-205 |

Number of pages | 13 |

Journal | Journal of Economic Theory and Econometrics |

Volume | 24 |

Issue number | 3 |

Publication status | Published - 2013 Sep 1 |

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### Keywords

- Minimum distance estimation
- Panel ordered logit
- Pension
- Self-assessed health

### ASJC Scopus subject areas

- Economics and Econometrics

### Cite this

*Journal of Economic Theory and Econometrics*,

*24*(3), 193-205.

**Effects of basic elder pension on self-assessed health : Fixed-effect ordered logit with time-varying parameters.** / Kim, Young Sook; Cheong, Taul; Lee, Myoung-jae.

Research output: Contribution to journal › Article

*Journal of Economic Theory and Econometrics*, vol. 24, no. 3, pp. 193-205.

}

TY - JOUR

T1 - Effects of basic elder pension on self-assessed health

T2 - Fixed-effect ordered logit with time-varying parameters

AU - Kim, Young Sook

AU - Cheong, Taul

AU - Lee, Myoung-jae

PY - 2013/9/1

Y1 - 2013/9/1

N2 - We examine the effects of the Basic Elder Pension (BEP) in Korea on self-assessed health for the elderly of age 65 or higher, using two wave Korean panel data. As there could be innately healthy/optimistic individuals, it is important to allow for time-constant individual effects possibly related to regressors, which is, however, difficult as the dependent variable takes on four ordered categories. To overcome this difficulty, we transform the ordered discrete response into binary, and apply Panel Conditional Logit Estimator (PCLE) to the binary model. Since there are three ways to transform four ordered categories into binary, we obtain three PCLE's in total. To impose the restriction that the same parameters are estimated in those PCLE's, we use minimum distance estimator. We find that BEP has a small positive effect that is significant: 100% increment in BEP would result in an increment of 3-7% of 'one standard deviation of the latent continuous health propensity'. Finding a small effect might be natural, as improving health for the elderly would be a hard thing to do.

AB - We examine the effects of the Basic Elder Pension (BEP) in Korea on self-assessed health for the elderly of age 65 or higher, using two wave Korean panel data. As there could be innately healthy/optimistic individuals, it is important to allow for time-constant individual effects possibly related to regressors, which is, however, difficult as the dependent variable takes on four ordered categories. To overcome this difficulty, we transform the ordered discrete response into binary, and apply Panel Conditional Logit Estimator (PCLE) to the binary model. Since there are three ways to transform four ordered categories into binary, we obtain three PCLE's in total. To impose the restriction that the same parameters are estimated in those PCLE's, we use minimum distance estimator. We find that BEP has a small positive effect that is significant: 100% increment in BEP would result in an increment of 3-7% of 'one standard deviation of the latent continuous health propensity'. Finding a small effect might be natural, as improving health for the elderly would be a hard thing to do.

KW - Minimum distance estimation

KW - Panel ordered logit

KW - Pension

KW - Self-assessed health

UR - http://www.scopus.com/inward/record.url?scp=84884953869&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84884953869&partnerID=8YFLogxK

M3 - Article

AN - SCOPUS:84884953869

VL - 24

SP - 193

EP - 205

JO - Journal of Economic Theory and Econometrics

JF - Journal of Economic Theory and Econometrics

SN - 1229-2893

IS - 3

ER -