nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2006‒03‒18
seven papers chosen by
Philip Yu
Hong Kong University

  1. The Happiness Gains from Sorting and Matching in the Labor Market By Simon Luechinger; Alois Stutzer; Rainer Winkelmann
  2. The importance of the regional development on the location of professional soccer teams. The Portuguese case 1970-1999 By Paulo Reis Mourão
  3. Temptation, Welfare and Revealed Preference By Jawwad Noor
  4. Estimation of Structural Parameters and Marginal Effects in Binary Choice Panel Data Models with Fixed Effects By Ivan Fernandez-Val;
  5. The use of permanent and temporary jobs across Spanish regions: Do unit labour cost differentials offer an explanation? By J. Ignacio García-Pérez; Yolanda Rebollo Sanz
  6. Production Targets and Free Disposal in the Private Provision of Public Goods By David P. Myatt; Chris Wallace
  7. Part-time Work - A Trap for Women`s Careers? An Analysis of the Roles of Heterogeneity and State Dependence By Mary Gregory; Sara Connolly

  1. By: Simon Luechinger (University of Zurich); Alois Stutzer (University of Zurich and IZA Bonn); Rainer Winkelmann (University of Zurich and IZA Bonn)
    Abstract: Sorting of people on the labor market not only assures the most productive use of valuable skills but also generates individual utility gains if people experience an optimal match between job characteristics and their preferences. Based on individual data on reported satisfaction with life it is possible to assess these latter gains from matching. We introduce a two-equation ordered probit model with endogenous switching and study self-selection into government and private sector jobs. We find considerable gains from matching amounting to an increase in the fraction of very satisfied workers from 53.8 to 58.8 percent relative to a hypothetical random allocation of workers to the two sectors.
    Keywords: matching, ordered probit, public sector employment, selection, switching regression, subjective well-being
    JEL: D60 I31 J24 J45
    Date: 2006–03
  2. By: Paulo Reis Mourão (Universidade do Minho - NIPE)
    Abstract: This work aims at testing the hypothesis “The economic development level of a region influences the presence of professional soccer teams in the country’s first league, which have their head offices in that region”. Using a rational choice model and working with binary time-series cross-section data, this work focuses on the Portuguese case, from 1970 to 1999. The results corroborate the main importance of three factors, which increase the probability that a municipality has the head office of a team that plays in the first league: the per capita revenue, the level of infrastructures and the demographic dimension.
    Keywords: Regional development; Sports; BTSCS; logit models
    JEL: R11 R33 L83
    Date: 2006
  3. By: Jawwad Noor (Department of Economics, Boston University)
    Abstract: Choice may be determined both by a consideration of one’s welfare (normative preference) and by desires (temptation preference). To provide foundations for such a theory, Gul and Pesendorfer [10, 11] adopt a preference over choice problems as a primitive and hypothesize that temptation creates a preference for commitment. This paper argues that temptation may in fact create the absence of a preference for commitment, and that the primitive may not be empirically meaningful since it requires us to observe behavior in the absence of temptation. An alternative approach to providing foundations is introduced. Motivated by the evidence on preference reversals, it is hypothesized that delayed temptations are easier to resist than immediate temptations. Normative preference is derived via choices between sufficiently delayed alternatives, and temptation preference is inferred from discrepancies between normative preference and choice. With a choice correspondence as the primitive, agents who are ‘tempted not to commit’ are modeled. The foundations of the model are used to identify evidence supporting such temptation.
    Keywords: Self-Control, Temptation, Commitment, Preference Reversals, Revealed Preference.
    JEL: D11 D60
    Date: 2005–04
  4. By: Ivan Fernandez-Val (Department of Economics, Boston University);
    Abstract: Fixed e®ects estimates of structural parameters in nonlinear panel models can be severely biased due to the incidental parameters problem. In this paper I show that the most important com- ponent of this incidental parameters bias for probit ¯xed e®ects estimators of index coe±cients is proportional to the true parameter value, using a large-T expansion of the bias. This result allows me to derive a lower bound for this bias, and to show that ¯xed e®ects estimates of ratios of coe±cients and average marginal e®ects have zero bias in the absence of heterogeneity and have negligible bias relative to their true values for a wide range of distributions of regressors and individual e®ects. Numerical examples suggest that this small bias property also holds for logit and linear probability models, and for exogenous variables in dynamic binary choice models. An empirical analysis of female labor force participation using data from the PSID shows that whereas the signi¯cant biases in ¯xed e®ects estimates of model parameters do not contami- nate the estimates of marginal e®ects in static models, estimates of both index coe±cients and marginal e®ects can be severely biased in dynamic models. Improved bias corrected estimators for index coe±cients and marginal e®ects are also proposed for both static and dynamic models.
    JEL: C23 C25 J22
    Date: 2005–10
  5. By: J. Ignacio García-Pérez (Department of Economics, Universidad Pablo de Olavide & Fundación Centro de Estudios Andaluces); Yolanda Rebollo Sanz (Department of Economics, 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: 2006–03
  6. By: David P. Myatt; Chris Wallace
    Abstract: In a collective-action game a player`s payoff is the sum of (i) a private component that depends only on that player`s action, and (ii) a public component, common to all players and dependent upon all actions. A classic application is the private provision of a public good. Play evolves: strategy revisions are made according to a multinomial-logit choice rule. Long-run behaviour is determined by a potential function, which incorporates the private (not social) benefits of activity. Behaviour may be influenced only by reducing public-good output (an application of a free-disposal property). When welfare is the expected time average of aggregate payoffs, it is socially optimal to either leave production well alone, or damage it as much as possible. This often takes the form of a production target, where all output is discarded unless some threshold is reached, potentially generating an equilibrium-selection problem. When the evolution of play approximates a best-reply process, the optimal threshold corresponds to the output level that an individual who pays all private costs but enjoys only private benefits would be just willing to provide.
    Keywords: Public Goods, Potential Games, Evolution, Quantal Response, Equilibrium Selection, Thresholds
    JEL: C72 C73 H41
    Date: 2005
  7. By: Mary Gregory; Sara Connolly
    Abstract: Part-time work has been a major area of employment growth for women in the UK over recent decades. Almost half the women in employment now work part-time and two-thirds have worked part-time for some part of their working lives. Part-time employment is welcomed by many women as a means of maintaining labour market participation particularly during the childcare years. However many part-time jobs are low paid and offer little opportunity for career advancement. This leads to conflicting views of the role of part-time work: allowing a full-time career to be maintained or as a dead-end trap for women`s careers. This paper examines this issue using cohort data which follows women`s labour market involvement up to age 42. The pathways followed through full-time employment, part-time employment and non-employment are found to be complex and highly varied. Using several estimation methods (pooled multinomial logits, dynamic random effects binary choice logits and selection-corrected random effects probits) on a 20-year panel we examine the relative roles of heterogeneity in characteristics and state dependence in explaining the choice of labour market state. Our major finding is that a woman`s labour market history reveals itself as the major determinant of subsequent labour market state, dominating the role of characteristics. Part-time work serves two different functions. Women whose past history involves full-time work even in conjunction with spells of part-time work or non-employment, revert to full-time work. Women whose labour market history combines spells in part-time work with non-employment are unlikely subsequently to take up full-time work.
    Keywords: Female Employment, Part-time Work, Persistence, Life-cycle, Dynamic Panel, Discrete Choice
    JEL: C23 C25 C33 C35 J16 J22 J62
    Date: 2005

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