nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2005‒09‒11
eight papers chosen by
Philip Yu
Hong Kong University

  1. Standard errors of marginal effects in the heteroskedastic probit model By Cornelißen, Thomas
  2. The use of permanent and temporary jobs across Spanish regions: Do unit labour cost differentials offer an explanation? By José Ignacio García Pérez; Yolanda Rebollo Sanz
  3. Iterative elimination of weakly dominated strategies in binary voting agendas with sequential voting By Hummel, Patrick
  4. Keeping Up with the Vaishyas: Caste and Relative Standing By Carlsson, Fredrik; Gupta, Gautam; Johansson-Stenman, Olof
  5. Are Agricultural Extension Packages What Ethiopian Farmers Want? A Stated Preference Analysis By Carlsson, Fredrik; Köhlin, Gunnar; Mekonnen, Alemu; Yesuf, Mahmud
  6. Employment Dynamics of Married Women in Europe By Pierre-Carl Michaud; Konstantinos Tatsiramos
  7. Entrepreneurship Among Married Couples in the United States: A Simultaneous Probit Approach By Simon C. Parker
  8. Vehicle Choices, Miles Driven, and Pollution Policies By Ye Feng; Don Fullerton; Li Gan

  1. By: Cornelißen, Thomas
    Abstract: In non-linear regression models, such as the heteroskedastic probit model, coefficients cannot be interpreted as marginal effects. Marginal effects can be computed as a non-linear combination of the regression coefficients. Standard errors of the marginal effects needed for inference and hypothesis testing have to be derived by approximation using methods such as the delta method. This paper applies the delta method to derive analytically the standard errors of marginal effects in a heteroskedastic probit model. The computation is implemented as a Stata ado-file called mehetprob which can be downloaded from the internet. This allows to compute marginal effects at means and their standard errors in a heteroskedastic probit model faster than by numerical calculation which is implemented in the mfx routine currently available in Stata for that purposes.
    Keywords: heteroskedastic probit model, marginal effects, Stata
    JEL: C25 C87
    Date: 2005–08
  2. By: José Ignacio García Pérez (Centro de Estudios Andaluces); Yolanda Rebollo Sanz (Universidad Pablo de Olavide)
    Abstract: We study the use of permanent and temporary contracts across Spanish regions during the period 1995-2001. First we show that there are significant differences among the regional rates of permanent employment and that these differences tend to persist over time. To understand the underlying factors behind these observed differences we estimate a binary choice model for the individual probability of having a permanent contract, taking advantage of the panel data dimension of the Spanish Labour Force Survey. Our main results are that unit labour cost differentials, and thus labour productivity and total labour cost differentials, partially explain the divergence of regional permanent employment rates. Moreover, compared to the influence of regional fixed effects and other possible explanations such as sector specialisation or the presence of small firms in the region, unit labour costs explain more than two thirds of the observed variance in the permanent employment rate across Spanish regions, once all the relevant heterogeneity is taken into account .
    Keywords: Temporary Employment, Unit Labour Costs, Random Effects, Spanish Regions.
    JEL: C23 J23 J31 J41
    Date: 2005
  3. By: Hummel, Patrick
    Keywords: perfect information games, extensive games, backward induction, weakly dominated strategies, iterative elimination of weakly dominated strategies, binary voting agendas, sequential voting
    Date: 2005–08
  4. By: Carlsson, Fredrik (Department of Economics, School of Economics and Commercial Law, Göteborg University); Gupta, Gautam (Department of Economics, Jadavpur University); Johansson-Stenman, Olof (Department of Economics, School of Economics and Commercial Law, Göteborg University)
    Abstract: We investigate the importance of relative income within the Indian Caste system, using a choice experiment. We find that slightly more than half of the marginal utility of income comes from some kind of relative income effects, on average, which is comparable to the results from previous studies in other countries. Belonging to a low caste and having a low family income are associated with higher concern for relative income. Moreover, an increase in the mean income of the caste to which the individual belongs, everything else held constant, reduces utility for the individual. Thus, the negative welfare effect of reduced relative income compared to the average own caste income dominates the positive welfare effect of increased relative income of the own caste relative to other castes. <p>
    Keywords: Caste; India; relative income; positionality; status; questionnaire-experimental methods; random utility models; choice experiments
    JEL: C91 D63 H21
    Date: 2005–08–17
  5. By: Carlsson, Fredrik (Department of Economics, School of Economics and Commercial Law, Göteborg University); Köhlin, Gunnar (Department of Economics, School of Economics and Commercial Law, Göteborg University); Mekonnen, Alemu (Department of Economics, Addis Ababa University, Ethiopia; and Environmental Economics Policy Forum); Yesuf, Mahmud (Environmental Economics Policy Forum, Ethiopian Development Research Institute, Ethiopia)
    Abstract: There is an evident dichotomy in many rural development policies in the world between extension driven adoption of modern inputs and community driven local public goods. However, the target populations of these policies seldom have the possibility to express their preference between these two policies. In this paper we report the results of a stated preference survey in the highlands of Ethiopia where the farmers are given a choice between an agricultural extension package and a local public good - health care or protected spring. The study finds that a majority of people prefers the public good. However, when the extension package is combined with insurance in terms of no payback of the credit in case of crop loss, then we find a significant increase in the choice of the extension package. The study thus sheds light on why Ethiopia’s major development strategy has had limited success and gives evidence of how stated preference methodologies can be utilized for development policy design. <p>
    Keywords: Agricultural extension; choice experiment; local public goods; Ethiopia; Africa
    JEL: D13 H41 H43 O13
    Date: 2005–08–17
  6. By: Pierre-Carl Michaud (RAND Corporation and IZA Bonn); Konstantinos Tatsiramos (IZA Bonn)
    Abstract: We use eight waves from the European Community Household Panel (1994-2001) to analyze the intertemporal labor supply behavior of married women in six European countries (Netherlands, France, Spain, Italy, Germany and United Kingdom) using dynamic binary choice models with different initial condition solutions and non parametric distributions of unobserved heterogeneity. Results are used to relate cross-country differences in the employment rate to the estimated dynamic regimes. We find that cross-country differences in the employment rate and the persistence of employment transitions of married women are mostly due to composition effects related to education and unobserved characteristics rather than state-dependence effects or the dynamic effect of fertility.
    Keywords: intertemporal labor supply, female employment, dynamic binary choice models, initial conditions
    JEL: C23 C25 D91 J22
    Date: 2005–07
  7. By: Simon C. Parker (University of Durham and IZA Bonn)
    Abstract: This article proposes a simultaneous probit equation framework to analyse the business ownership patterns of married couples in the United States. A structural model of knowledge spillovers within couples is formulated and estimated. Empirical analysis reveals significant and substantial positive interdependence of business ownership propensities within couples. We argue that the evidence is consistent with both male and female spouses receiving positive knowledge transfers from the other. Conversely, there appears to be little support for alternative explanations of interdependent occupational choices based on assortative mating, role model effects, risk diversification, or intrahousehold wealth transfers. We conclude that the conventional practice of ignoring occupational interdependence can generate misleading conclusions about the determinants of business ownership in America.
    Keywords: entrepreneurship, occupational choice, family, business ownership
    JEL: J23 J24 M13
    Date: 2005–07
  8. By: Ye Feng; Don Fullerton; Li Gan
    Abstract: Mobile sources contribute large percentages of each pollutant, but technology is not yet available to measure and tax emissions from each vehicle. We build a behavioral model of household choices about vehicles and miles traveled. The ideal-but-unavailable emissions tax would encourage drivers to abate emissions through many behaviors, some of which involve market transactions that can be observed for feasible market incentives (such as a gas tax, subsidy to new cars, or tax by vehicle type). Our model can calculate behavioral effects of each such price and thus calculate car choices, miles, and emissions. A nested logit structure is used to model discrete choices among different vehicle bundles. We also consider continuous choices of miles driven and the age of each vehicle. We propose a consistent estimation method for both discrete and continuous demands in one step, to capture the interactive effects of simultaneous decisions. Results are compared with those of the traditional sequential estimation procedure.
    JEL: D12 H23 Q58
    Date: 2005–08

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.