nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2005‒07‒11
three papers chosen by
Philip Yu
Hong Kong University

  1. Discrete choice models of labour Supply, behavioural microsimulation and the Spanish tax reforms By José M. Labeaga, Xisco Oliver; Xisco Oliver; Amedeo Spadaro
  3. Persistence and ability in the innovation decisions By José M. Labeaga, Ester Martínez Ros; Ester Martínez Ros

  1. By: José M. Labeaga, Xisco Oliver; Xisco Oliver; Amedeo Spadaro
    Abstract: In this paper, we demonstrate the potential of behavioural microsimulation models as powerful tools for the ex ante evaluation of public policies. The subject of our analysis is the impact of recent Spanish Income Tax reforms on efficiency and household and social welfare. We also analyze the likely effects of some basic income flat tax and vital minimum flat tax schemes. The analysis is carried out using a microsimulation model in which labour supply is explicitly taken into account. Instead of following the traditional continuous approach (Hausman 1981, 1985a, and 1985b), we estimate the direct utility function using the methodology proposed by Van Soest (1995). Our data come from a sample of Spanish individuals in the 1995 wave of the EC Household Panel. We show that in the Spanish case, the redistribution policies considered have only little impact on the efficiency of the economy. On the contrary, they strongly affect social welfare.
  2. By: Gian Maria Tomat (Bank of Italy, Research Department, Rome Branch)
    Abstract: The paper provides an analysis of the problems of construction of quality-adjusted price indexes within the framework of the theory of product differentiation. In the general case of price-making behaviour on the part of firms, hedonic regressions are defined on the basis of reduced forms of the equation relating equilibrium prices to product characteristics. The paper considers the reduced form given by the marginal cost function and shows that the Laspeyres hedonic price index provides a lower bound to the quality-adjusted rate of price change while the Paasche hedonic price index provides an upper bound to the quality-adjusted rate of price change. The properties of hedonic price indexes are compared with those of matched model indexes. The theory is applied to the study of personal computer prices in Italy during the 1995-2000 period.
    Keywords: discrete choice, price indexes, product quality, personal computer
    JEL: C35 C43
    Date: 2005–02
  3. By: José M. Labeaga, Ester Martínez Ros; Ester Martínez Ros
    Abstract: This paper explores the effect of persistence and manager ability in the decision to conduct product and process innovations. Managers make strategic decisions about the implementation of a better innovation activity in order to improve their firm’s performance in the market. Many empirical studies have analysed the determinants of the innovation process, but few have considered the effect of experience (the firm’s capacities and routines of organization) and the manager’s ability (skills and capability) as relevant elements. Our aim is to demonstrate the importance of these elements using typical discrete-choice specifications and binary choice models with heterogeneity. We do so in an extensive database that provides information about Spanish manufacturing firms. Our message is that persistence, however measured, is the main determinant of any innovation activity. The experience effect is important in both product and process innovation decisions but the results differ in degree: The experience gained from engaging in process innovations appears to increase the probability of process innovation success, whereas the experience gained from product innovation activity, although important, leaves place to other factors determining product innovation success. Once a firm has a commitment to innovation activity, develops some innovation routines, and learns about the innovation process, it reaches a turning point at which other factors play a less prominent role.

This nep-dcm issue is ©2005 by Philip Yu. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.