nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2005‒11‒05
eight papers chosen by
Philip Yu
Hong Kong University

  1. Does the Profit Motive Make Jack Nimble? Ownership Form and the Evolution of the U.S. Hospital Industry By Sujoy Chakravarty; Martin Gaynor; Steven Klepper; William B. Vogt
  2. Determinants of Poverty in Kenya: A Household Level Analysis By Alemayehu Geda; Niek de Jong; Mwangi S. Kimenyi; Germano Mwabu
  3. Preferences and the Dynamic Representative Consumer By Christos Koulovatianos
  4. Cox-McFadden Partial and Marginal Likelihoods for the Proportional Hazard Model with Random Effects By Jan Ondrich
  5. Residential Segregation in General Equilibrium By Patrick Bayer; Robert McMillan; Kim Rueben
  6. Using a choice experiment to estimate the non-use values of wetlands: The case of Cheimaditida wetland in Greece By Ekin Birol; Katia Karousakis; Phoebe Koundouri
  7. Using a Choice Experiment to Estimate the Demand of Hungarian Farmers for Food Security and Agrobiodiversity During Economic Transition By Ekin Birol; Andreas Kontoleon; Melinda Smale
  8. Ranking Inequality: Applications of Multivariate Subset Selection By William C. Horrace; Joseph T. Marchand; Timothy M. Smeeding

  1. By: Sujoy Chakravarty; Martin Gaynor; Steven Klepper; William B. Vogt
    Abstract: We examine the evolving structure of the U.S. hospital industry since 1970, focusing on how ownership form influences entry and exit behavior. We develop theoretical predictions based on the model of Lakdawalla and Philipson, in which for-profit and not-for-profit hospitals differ regarding their objectives and costs of capital. The model predicts for-profits would be quicker to enter and exit than not-for-profits in response to changing market conditions. We test this hypothesis using data for all U.S. hospitals from 1984 through 2000. Examining annual and regional entry and exit rates, for-profit hospitals consistently have higher entry and exit rates than not-for-profits. Econometric modeling of entry and exit rates yields similar patterns. Estimates of an ordered probit model of entry indicate that entry is more responsive to demand changes for for-profit than not-for-profit hospitals. Estimates of a discrete hazard model for exit similarly indicate that negative demand shifts increase the probability of exit more for for-profits than not-for-profits. Finally, membership in a hospital chain significantly decreases the probability of exit for for-profits, but not not-for-profits.
    JEL: I11 L11 L2 L3
    Date: 2005–10
  2. By: Alemayehu Geda (Institute of Social Studies and Addis Ababa University); Niek de Jong (Institute of Social Studies, The Hague); Mwangi S. Kimenyi (University of Connecticut); Germano Mwabu (University of Nairobi and Yale University)
    Abstract: Strategies aimed at poverty reduction need to identify factors that are strongly associated with poverty and that are amenable to modification by policy. This article uses household level data collected in 1994 to examine probable determinants of poverty status, employing both binomial and polychotomous logit models. The study shows that poverty status is strongly associated with the level of education, household size and engagement in agricultural activity, both in rural and urban areas. In general, those factors that are closely associated with overall poverty according to the binomial model are also important in the ordered-logit model, but they appear to be even more important in tackling extreme poverty.
    Keywords: Poverty, Kenya, Africa, Probability Models
    JEL: I30 I32 N97
    Date: 2005–01
  3. By: Christos Koulovatianos
    Abstract: This paper provides families of time-separable, twice continuously di?erentiable, and strictly concave utility functions of a group of consumers that are both su?cient and necessary in order to have linear aggregation in a single-commodity-type deterministic dynamic environment, in the presence of consumer wealth-, labor-productivity, and preference heterogeneity, for alternative settings where the rates of time preference can be the same or di?erent across consumers. The employed concept of linear aggregation pertains the existence of a representative consumer with a time-separable utility function. It is proved that when the rates of time preference are choice-independent and heterogeneous across consumers, a representative consumer exists if, and only if, the momentary utility functions of all consumers are exponential. Results are also provided for, (i) common across consumers choice-independent rates of time preference, and, (ii) heterogeneous choice-dependent rates of time preference, and compared with previously identi?ed su?cient conditions for aggregation in the existing literature.
    JEL: D11 D31 D91
    Date: 2005–05
  4. By: Jan Ondrich (Center for Policy Research, Maxwell School, Syracuse University)
    Abstract: In survival analysis, Cox's name is associated with the partial likelihood technique that allows consistent estimation of proportional hazard scale parameters without specifying a duration dependence baseline. In discrete choice analysis, McFadden's name is associated with the generalized extreme-value (GEV) class of logistic choice models that relax the independence of irrelevant alternatives assumption. This paper shows that the mixed class of proportional hazard specifications allowing consistent estimation of scale and mixing parameters using partial likelihood is isomorphic to the GEV class. Independent censoring is allowed and I discuss approximations to the partial likelihood in the presence of ties. Finally, the partial likelihood score vector can be used to construct log-rank tests that do not require the independence of observations involved.
    Keywords: proportional hazard, random effects, partial likelihood, GEV class
    JEL: C14 C41
    Date: 2005–08
  5. By: Patrick Bayer (Economic Growth Center, Yale University); Robert McMillan; Kim Rueben
    Abstract: This paper studies the causes and consequences of racial segregation using a new general equilibrium model that treats neighborhood compositions as endogenous. The model is estimated using unusually detailed restricted Census microdata covering the entire San Francisco Bay Area, and in combination with a rich array of econometric estimates, serves as a powerful tool for carrying out counterfactual simulations that shed light on the causes and consequences of segregation. In terms of causes, and contrasting with prior research, our GE simulations indicate that equalizing income and education across race would be unlikely to result in significant reductions in racial segregation, as minority households would sort into newly formed minority neighborhoods. Indeed, among Asian and Hispanic households, segregation increases. In terms of consequences, this paper provides the first evidence that sorting on the basis of race gives rise to significant reductions in the consumption of local public goods by minority households and upper-income minority households in particular. These consumption effects are likely to have important intergenerational implications.
    Keywords: Segregation, General Equilibrium, Endogenous Sorting, Urban Housing Market, Locational Equilibrium, Counterfactual Simulation, Discrete Choice
    JEL: H0 J7 R0 R2
    Date: 2004–05
  6. By: Ekin Birol (Homerton College and Department of Land Economy, University of Cambridge, Cambridge, UK); Katia Karousakis (Department of Economics, University College London, London, UK); Phoebe Koundouri (Department of Economics, Reading University, Reading, UK)
    Abstract: Despite wetlands being amongst the Earth's most productive ecosystems, they have been degraded and lost at an unprecedented rate globally, especially throughout the last century. In recognition of the importance of the crucial ecological functions and economic benefits they provide, international efforts, such as the Ramsar Convention, and European Union level efforts, such as the Water Framework Directive (2000/60/EC), are now in place to ensure conservation, sustainable management and improvement of the remaining wetlands. This paper aims to assist policy makers in formulating efficient, effective and sustainable wetland conservation and management policies by providing them with the results of a valuation study using the Cheimaditida wetland in Greece as a case study. A choice experiment is employed to estimate the benefits of the non-use values of the Cheimaditida wetland that accrue to the Greek public. Results from this choice experiment reveal that there are positive and significant non-use values of this wetland for whose conservation the public is willing to pay. These results can be combined with private use values of wetlands, and weighed against the costs of alternative wetland management scenarios in order to carry out a comprehensive cost benefit analysis. Thus they can aid in the design of socially optimal policies for conservation and sustainable management of the Cheimaditida wetland, with implications for other wetlands in Greece and the rest of Europe.
    Keywords: Choice experiment, non-use values, wetlands, conditional logit model, random parameter logit mode
    Date: 2005–02
  7. By: Ekin Birol (Homerton College, University of Cambridge, UK); Andreas Kontoleon (Department of Land Economy, University of Cambridge, UK); Melinda Smale (International Food Policy Research Institute, Washington DC, USA and International Plant Genetic Resources Institute, Rome, Italy)
    Abstract: Hungarian home gardens are small farms that are repositories of agrobiodiversity and provide food security during economic transition. We use a choice experiment to test the hypothesis that farmer demand for home gardens will decrease as markets develop with European Union accession. Data represent 22 communities with varying levels of market and social infrastructure. We find that farmers located in more economically developed communities choose to be less dependent on small farms for food and prefer lower levels of agrobiodiversity. Findings indicate that the survival of small farms is jeopardized by economic change, but point to some conservation policy options.
    Keywords: food security, agrobiodiversity, home gardens, choice experiment, multi-functional agriculture
    Date: 2005–06
  8. By: William C. Horrace (Center for Policy Research, Maxwell School, Syracuse University); Joseph T. Marchand (Center for Policy Research, Maxwell School, Syracuse University); Timothy M. Smeeding (Center for Policy Research, Maxwell School, Syracuse University)
    Abstract: Inequality measures are often presented in the form of a rank ordering to highlight their relative magnitudes. However, a rank ordering may produce misleading inference, because the inequality measures themselves are statistical estimators with different standard errors, and because a rank ordering necessarily implies multiple comparisons across all measures. Wityhin this setting, if differences between several inequality measures are *simultaneously* and statistically insignificant, the interpretation of the ranking is changed. This study uses a multivariate subset selection procedure to make simultaneous distinctions across inequality measures at a pre-specified confidence level. Three applications of this procedure are explored using country-level data from the Luxembourg Income Study. The findings show that simultaneous precision plays an important role in relative inequality comparisons and should not be ignored.
    Keywords: income distribution, inference, poverty, subset selection
    JEL: D31 C12
    Date: 2005–10

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