Generalised Ordered Choice Models: Simulations and Empirical Example

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When dealing with multiple discrete variables, it is common to run separate ordered choice models, which imposes a particular structure on the latent variable space. In this paper we generalise this structure, which allows thresholds to depend upon all dependent variables considered. First, we state the econometric model and discuss identification and estimation. Then, we present simulations, including one on the estimation of static games. Finally, we discuss the application of the new method to two applied papers. The first paper is Malmendier and Nagel's study of the relationship between experienced stock returns and financial risk taking. The second is Besley and Persson's paper, "The Logic of Political Violence".