nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2005‒06‒14
fifteen papers chosen by
Philip Yu
Hong Kong University

  1. Simple Endogenous Binary Choice and Selection Panel Model Estimators By Arthur Lewbel
  2. Pill, Patch or Shot? Subjective Expectations and Birth Control Choice By Delavande, Adeline
  3. Location Choice and Employment Decisions: A Comparison of German and Swedish Multinationals By Becker, Sascha O.; Ekholm, Karolina; Jäckle, Robert; Muendler, Marc-Andreas
  4. Why and Where do Headquarters Move? By Strauss-Kahn, Vanessa; Vives, Xavier
  5. The Benefits of Separating Early Retirees from the Unemployed: Simulation Results for Belgian Wage Earners By Desmet, Raphael; Jousten, Alain; Perelman, Sergio
  6. Nonstationary Discrete Choice: A Corrigendum and Addendum By Peter C.B. Phillips; Sainan Jin; Ling Hu
  7. The delinquency of subprime mortgages By Michelle A. Danis; Anthony Pennington-Cross
  8. Estimation of dynamic linear models in short panels with ordinal observation By Stephen Pudney
  9. State Dependence in a Multi-State Model of Employment Dynamics By Victoria Prowse
  10. A Multinomial Logit Model of College Stopout and Dropout Behavior By Leslie S. Stratton; Dennis M. O’Toole; James N. Wetzel
  11. Choice under Uncertainty and Bounded Rationality By John K. Dagsvik
  12. Some aspects of social choice theory (in Japanese) By Yasuhito Tanaka
  13. Algebraic topology and social choice theory, First part (in Japanese) By Yasuhito Tanaka
  14. Development of social choice theory (in Japanese) By Yasuhito Tanaka
  15. Basics of social choice theory (in Japanese) By Yasuhito Tanaka

  1. By: Arthur Lewbel (Boston College)
    Abstract: This paper provides numerically trivial estimators for short panels of either binary choices or of linear models that suffer from confounded, nonignorable sample selection. The estimators allow for fixed effects, endogenous regressors, lagged dependent variables, and heterokedastic errors with unknown distribution. The estimators, which converge at rate root n, are based on variants of the Honoré and Lewbel (2002) panel binary choice model and Lewbel's (2005) cross section sample selection model.
    Keywords: Panel Data, Fixed Effects, Binary Choice, Binomial Response, Sample Selection, Treatment, Semiparametric, Latent Variable, Predetermined Regressors, Lagged Dependent Variable, Endogeneity, Instrumental Variable.
    Date: 2005–02–01
  2. By: Delavande, Adeline
    Abstract: When choosing a contraception method, women base their decisions on their subjective expectations about the realizations of method-related outcomes. Examples of such outcomes include getting pregnant, contracting a sexually transmitted disease (STD) or experiencing side effects. By conducting a face-to-face survey, I have assembled a unique dataset on women’s subjective expectations regarding existing birth control methods. While respondents have, on average, expectations consistent with actual population outcomes, they exhibit substantial heterogeneity in their subjective beliefs, which emphasizes the need to rely on expectations data when conducting inference. I combine expectations data with observed choices to estimate a random utility model of birth control choice, without making any assumption about expectations. Effectiveness, protection against STDs and partner’s disapproval are found to be the most important factors in the decision process. I have also elicited respondents’ willingness to pay (WTP) for a hypothetical 100% effective birth control method. Remarkably, the median elicited WTP is very close to the estimated parameter for preferences toward pregnancy outcome expressed in dollars. The reported WTPs are incorporated directly in the estimation to fully account for preferences heterogeneity for getting pregnant.
    Keywords: contraception; subjective expectations; uncertainty
    JEL: D81 J13
    Date: 2005–01
  3. By: Becker, Sascha O.; Ekholm, Karolina; Jäckle, Robert; Muendler, Marc-Andreas
    Abstract: Using data on German and Swedish multinational enterprises (MNEs), this paper analyses determinants of international location choice and the degree of substitutability of labour across locations. Countries with highly skilled labour forces strongly attract German but not necessarily Swedish MNEs. In MNEs from either country, affiliate employment tends to substitute for employment at the parent firm. At the margin, substitutability is the strongest with respect to affiliate employment in Western Europe. A 1% larger wage gap between Germany and locations in Central and Eastern Europe (CEE) is associated with 900 fewer jobs at German parents and 5,000 more jobs at affiliates in CEE. A 1% larger wage gap between Sweden and CEE is associated with 140 fewer jobs at Swedish parents and 260 more jobs at affiliates in CEE.
    Keywords: labour demand; location choice; multinational enterprises; multinominial choice; translog cost function
    JEL: F21 F23 J21 J23
    Date: 2005–02
  4. By: Strauss-Kahn, Vanessa; Vives, Xavier
    Abstract: This paper analyses decisions regarding the location of headquarters in the US for the period 1996-2001. Using a unique firm-level database of about 30,000 US headquarters, we study the firm- and location-specific characteristics of headquarters that relocated over that period. Headquarters are concentrated, increasingly so in medium-sized service-oriented metropolitan areas, and the rate of relocation is significant (5% a year). Larger (in terms of sales) and younger headquarters tend to relocate more often, as well as larger (in terms of the number of headquarters) and foreign firms, and firms that are the outcome of a merger. Headquarters relocate to metropolitan areas with good airport facilities, low corporate taxes, low average wages, high level of business services and agglomeration of headquarters in the same sector of activity.
    Keywords: agglomeration externalities; business services; communication costs; congestion; corporate history; mergers; nested logit; taxes
    JEL: F15 F23 L20 R12
    Date: 2005–05
  5. By: Desmet, Raphael; Jousten, Alain; Perelman, Sergio
    Abstract: The pool of early retirees is characterized by a large heterogeneity along several criteria. The present paper focuses on the key distinction between those in forced early retirement and those who retire early by individual choice. We start by estimating a retirement probit model for older workers in Belgium. Based on these estimates, we then perform micro-simulations relating to a hypothetical actuarial reform of a pension system, i.e., a reform imposing on average actuarial neutrality with respect to the time of retirement. We explore two scenarios, one where the entire population is subjected to the actuarial system, and one where a duly screened sub-sample of the unemployed is shielded against these actuarial adjustment factors, a group we call the truly unemployed. We evaluate the impact on the average retirement age, the pension budgets as well as indicators of redistribution within the group of the elderly. We find that the extra budgetary gain of exposing this subgroup to the full-blown reform is modest, while the distributional cost is rather high. Our results thus comfort the idea that the budgetary cost of a focused unemployment system are moderate, and that returning the unemployment insurance to its primary role might be a desirable strategy.
    Keywords: inequality; older worker; retirement
    JEL: H31 I30 J14
    Date: 2005–05
  6. By: Peter C.B. Phillips (Cowles Foundation, Yale University); Sainan Jin (Guanghua School of Management, Peking University); Ling Hu (Dept. of Economics, Ohio State University)
    Abstract: We correct the limit theory presented in an earlier paper by Hu and Phillips (Journal of Econometrics, 2004) for nonstationary time series discrete choice models with multiple choices and thresholds. The new limit theory shows that, in contrast to the binary choice model with nonstationary regressors and a zero threshold where there are dual rates of convergence (n^{1/4} and n^{3/4}), all parameters including the thresholds converge at the rate n^{3/4}. The presence of non-zero thresholds therefore materially affects rates of convergence. Dual rates of convergence reappear when stationary variables are present in the system. Some simulation evidence is provided, showing how the magnitude of the thresholds affects finite sample performance. A new finding is that predicted probabilities and marginal effect estimates have finite sample distributions that manifest a pile-up, or increasing density, towards the limits of the domain of definition.
    Keywords: Brownian motion, Brownian local time, Discrete choices, Integrated processes, Pile-up problem, Threshold parameters
    JEL: C23 C25
    Date: 2005–06
  7. By: Michelle A. Danis; Anthony Pennington-Cross
    Abstract: This paper focuses on understanding the determinants of the performance of subprime mortgages. A growing body of literature recognizes the substantial lag between the time that a borrower stops making payments on a mortgage and the termination of the loan. The duration of this lag and the method by which the delinquency is ultimately terminated play a critical role in the costs borne by both borrower and lender. Using nested and multinomial logit, we find that delinquency and default are sensitive to current economic conditions and housing markets. Credit scores and loan characteristics also play important roles.
    Keywords: Mortgages
    Date: 2005
  8. By: Stephen Pudney (Institute for Fiscal Studies and Institute for Social and Economic Research)
    Abstract: We develop a simulated ML method for short-panel estimation of one or more dynamic linear equations, where the dependent variables are only partially observed through ordinal scales. We argue that this latent autoregression (LAR) model is often more appropriate than the usual state-dependence (SD) probit model for attitudinal and interval variables. We propose a score test for assisting in the treatment of initial conditions and a new simulation approach to calculate the required partial derivative matrices. An illustrative application to a model of households’ perceptions of their financial well-being demonstrates the superior fit of the LAR model.
    Keywords: Dynamic panel data models, ordinal variables, simulated maximum likelihood, GHK simulator, BHPS
    JEL: C23 C25 C33 C35 D84
    Date: 2005–06
  9. By: Victoria Prowse (Nuffield College, Oxford and IZA Bonn)
    Abstract: A multinomial choice framework is used to investigate the nature of women's transitions between full-time employment, part-time employment and non-employment. The stochastic framework allows time varying and time invariant unobserved preferences, and also controls for the possible endogeneity of education, fertility and non-labor income. Significant positive true state dependence is found in both full-time and part-time employment. This finding is robust to the specification of unobserved preferences. The results are used to assess the dynamic effects of three temporary wage subsidies. All three policies have substantial effects on employment behavior for up to 6 years. However, obtaining a permanent increase in employment requires sustained or repeated interventions.
    Keywords: dynamic labor supply, heterogeneity, multinomial choice, state dependence
    JEL: C15 C35 J62
    Date: 2005–06
  10. By: Leslie S. Stratton (Virginia Commonwealth University, CIM and IZA Bonn); Dennis M. O’Toole (Virginia Commonwealth University); James N. Wetzel (Virginia Commonwealth University)
    Abstract: Studies of college attrition typically assume that all attrition is permanent. We use data from the 1990/94 Beginning Postsecondary Survey to distinguish between long-term dropout and short-term stopout behavior in order to test that assumption. We find significant differences between those who stop out and those who drop out in the first year. Failure to recognize these differences biases the results of standard attrition models and hence may cause policy makers to pursue inappropriate policy initiatives or incorrectly target at-risk populations. Furthermore, the type of financial aid received is found to have a differential impact on stopout versus dropout probabilities.
    Keywords: college persistence, college dropout
    JEL: I21
    Date: 2005–06
  11. By: John K. Dagsvik (Statistics Norway)
    Abstract: This paper develops a theory for probabilistic models for risky choices that can be viewed as an extension of the expected utility theory to account for bounded rationality. One probabilistic version of the Archimedean Axiom and two versions of the Independence Axiom are proposed. In addition, additional axioms are proposed of which one is Luce’s Independence from Irrelevant Alternatives. It is demonstrated that different combinations of the axioms yield different characterizations of the probabilities for choosing the respective risky prospects
    Keywords: Random tastes; bounded rationality; independence from irrelevant alternatives; choice among lotteries; probabilistic choice for uncertain outcomes.
    JEL: C25 D11 D81
    Date: 2005–03
  12. By: Yasuhito Tanaka (Doshisha University)
    Abstract: Some aspects of social choice theory
    JEL: D6 D7 H
    Date: 2005–06–06
  13. By: Yasuhito Tanaka (Doshisha University)
    Abstract: Algebraic topology and social choice theory
    JEL: D6 D7 H
    Date: 2005–06–06
  14. By: Yasuhito Tanaka (Chuo University)
    Abstract: Development of social choice theory
    JEL: D6 D7 H
    Date: 2005–06–06
  15. By: Yasuhito Tanaka (Chuo University)
    Abstract: Basics of social choice theory
    JEL: D6 D7 H
    Date: 2005–06–06

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