nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2007‒01‒02
twelve papers chosen by
Philip Yu
Hong Kong University

  1. L’under-reporting della ricchezza finanziaria nell'indagine sui bilanci delle famiglie italiane By Leandro D’Aurizio; Ivan Faiella; Stefano Iezzi; Andrea Neri
  2. Cake Division by Majority Decision By Hans Gersbach; Bernhard Pachl
  3. Academic Journals as Two-Sided Platforms: Empirical Evidence from Data on French Libraries By Dubois, Pierre; Hernandez-Perez, Adriana; Ivaldi, Marc
  4. Counterfeit or genuine: can you tell the difference? By Nicole Jonkera; Bram Scholten; Marco Wind (DNB); Martijn van Emmerik; Marieke van der Hoeven (TNO Human Factors)
  5. Evolving agglomeration in the U.S. auto supplier industry By Thomas H. Klier; Daniel McMillen
  6. Ordered Response Models for Sovereign Debt Ratings By António Afonso; Pedro Gomes; Philipp Rother
  7. What “Hides” Behind Sovereign Debt Ratings? By António Afonso; Pedro Gomes; Philipp Rother
  8. From No Pay to Low Pay and Back Again? A Multi-State Model of Low Pay Dynamics By Arne Uhlendorff
  9. Long Work Hours: Volunteers and Conscripts By Robert Drago; Mark Wooden; David Black
  10. Which Factors Determine the Grades of Undergraduate Students in Economics? Some Evidence from Spain By Juan J. Dolado; Eduardo Morales
  11. Labor Market Dynamics in Romania During a Period of Economic Liberalization By Benoit Dostie; David E. Sahn
  12. Corrections to classical procedures for estimating thurstone´s case v model for ranking data By ALBERTO MAYDEU

  1. By: Leandro D’Aurizio (Bank of Italy); Ivan Faiella (Bank of Italy); Stefano Iezzi (Bank of Italy); Andrea Neri (Bank of Italy)
    Abstract: The sample estimates are uniformly below those of the Financial Accounts, even after harmonising all the definitions and the evaluation criteria. Such a problem can stem from the interviewee’s unwillingness to disclose the actual value of the asset (under-reporting). The paper presents a method to correct this potential source of bias in order to improve Survey of Household Income and Wealth financial assets. We use a sample survey of customers of the Unicredit group, coupled with administrative data on the assets actually owned, as external sources of information. The adjustment procedure enables to account for a large share of the gap between the figures derived from the sample and from the Financial accounts, significantly increasing the average value of the financial assets (inflating the unadjusted figure of 22.000 euros to 59.000 euros, amounting to about 85 percent of the Financial account estimates). The adjustment produces a larger correction for private bonds and mutual funds. The intensity of the correction is higher for one-person households, when the head of household is less educated or not employed, and it raises with his/her age.
    Keywords: Household Wealth, Survey Method, Discrete Regression and Qualitative Choice Models
    JEL: C25 C42 D31
    Date: 2006–12
  2. By: Hans Gersbach; Bernhard Pachl
    Abstract: We consider a collective choice process where three players make proposals sequentially on how to divide a given quantity of resources. Afterwards, one of the proposals is chosen by majority decision. If no proposal obtains a majority, a proposal is drawn by lot. We establish the existence of the set of subgame perfect equilibria, using a suitable refinement concept. In any equilibrium, the first agent offers the whole cake to the second proposal-maker, who in turn offers the whole cake back to the first agent. The third agent is then indifferent about dividing the cake between himself and the first or the second agent.
    Keywords: division of a cake, majority decisions, tie-breaking rules
    JEL: C72 D30 D39 D72
    Date: 2006
  3. By: Dubois, Pierre; Hernandez-Perez, Adriana; Ivaldi, Marc
    Abstract: This paper analyzes the demand and cost structure of the French market of academic journals, taking into account its intermediary role between researchers, who are both producers and consumers of knowledge. This two sidedness feature will echoes similar problems already observed in electronic markets - payment card systems, video game consoles, etc. - such as the chicken and egg problem, where readers won’t buy a journal if they do not expect its articles to be academically relevant and researchers, that live under the mantra 'Publish or Perish', will not submit to a journal with either limited public reach or weak reputation. After the merging of several databases, we estimate the aggregated nested logit demand system combined simultaneously with a cost function. We identify the structural parameters of this market and find that price elasticities of demand are quite large and margins relatively low, indicating that this industry experiences competitive constraints.
    Keywords: differentiated products models; media industry; two-sided platforms
    JEL: L11 L82
    Date: 2006–12
  4. By: Nicole Jonkera; Bram Scholten; Marco Wind (DNB); Martijn van Emmerik; Marieke van der Hoeven (TNO Human Factors)
    Abstract: In 2005, some 25,000 counterfeit euro banknotes were identified in the Netherlands, representing a fictitious amount of two million euro. In collaboration with the TNO research institute, DNB has investigated how accurately cash handlers and consumers with no cash handler experience can distinguish counterfeit euro notes from genuine ones. Also examined was the question whether the use of DNB's educational CD-ROM entitled ‘Genuine or Counterfeit?' led to improved performance and whether such aids as UV lights or IR cameras helped to identify notes correctly. The results show that the public is quite capable of recognising a counterfeit note: without practice, members of the general public correctly identified 88% of counterfeit notes they were given to examine, while after training they scored as high as 96%. Remarkable scores were recorded by cash handlers operating without aids: even without training they showed themselves expert at sifting the wheat from the chaff (98% correctly identified counterfeit notes). Recognising genuine euro notes proved slightly more challenging, but here technical aids provided useful services. Practice with the help of the CD-ROM turned out to benefit untrained consumers in particular. They soon managed to bring their performance up to the level of experienced cash handlers. 
    Keywords: banknotes; counterfeits; discrete choice model; experiment; training
    Date: 2006–12
  5. By: Thomas H. Klier; Daniel McMillen
    Abstract: Using nonparametric descriptive tools developed by Duranton and Overman (2005), we show that both new and old auto supplier plants are highly concentrated in the eastern United States. Conditional logit models imply that much of this concentration can be explained parametrically by distance from Detroit, proximity to assembly plants, and access to the interstate highway system. New plants are more likely to be located in zip codes that are close to existing supplier plants. However, the degree of clustering observed is still greater than implied by the logit estimates.
    Date: 2006
  6. By: António Afonso; Pedro Gomes; Philipp Rother
    Abstract: Using ordered logit and probit plus random effects ordered probit approaches, we study the determinants of sovereign debt ratings. We found that the last procedure is the best for panel data as it takes into account the additional cross-section error.
    Keywords: ordered probit; ordered logit; random effects ordered probit; sovereign rating.
    JEL: C25 E44 F30 G15
  7. By: António Afonso; Pedro Gomes; Philipp Rother
    Abstract: In this paper we study the determinants of sovereign debt credit ratings using rating notations from the three main international rating agencies, for the period 1995-2005. We employ panel estimation and random effects ordered probit approaches to assess the explanatory power of several macroeconomic and public governance variables. Our results point to a good performance of the estimated models, across agencies and across the time dimension, as well as a good overall prediction power. Relevant explanatory variables for a country's credit rating are: GDP per capita, GDP growth, government debt, government effectiveness indicators, external debt, external reserves, and default history.
    Keywords: credit ratings; sovereign debt; rating agencies; panel data; random effects ordered probit.
    JEL: C23 C25 E44 F30 F34 G15 H63
  8. By: Arne Uhlendorff (DIW Berlin, Free University of Berlin and IZA Bonn)
    Abstract: This study analyzes the mobility between three labor market states: working in low paid jobs, working in higher paid jobs and not working. Using German panel data I estimate dynamic multinomial logit panel data models with random effects taking the initial conditions problem and potential endogeneity of panel attrition into account. In line with results from other countries, this first study on Germany finds true state dependence in low pay jobs and confirms previous results of state dependence in non-employment. Moreover, I find evidence for a "low pay no pay cycle", i.e. being low paid or not employed itself increases the probability of being in one of these states in the next year. However, compared to non working, being low paid does not have adverse effects on future employment prospects: the employment probability increases with low pay employment and the probability of being high paid seems to be higher for previously low paid workers. I find no evidence for endogenous panel attrition.
    Keywords: low pay dynamics, unemployment dynamics, dynamic random effects models, state dependence, panel attrition, unobserved heterogeneity
    JEL: J64 J62 J31 C33 C35
    Date: 2006–12
  9. By: Robert Drago (Pennsylvania State University); Mark Wooden (University of Melbourne and IZA Bonn); David Black (University of Melbourne)
    Abstract: Panel data from Australia are used to study the prevalence of work hours mismatch among long hours workers and, more importantly, how that mismatch persists and changes over time, and what factors are associated with these changes. Particular attention is paid to the roles played by household debt, ideal worker characteristics and gender. Both static and dynamic multinomial logit models are estimated, with the dependent variable distinguishing long hours workers from other workers, and within the former, between "volunteers", who prefer long hours, and "conscripts", who do not. The results suggest that: (i) high levels of debt are mainly associated with conscript status; (ii) ideal worker types can be found among both volunteers and conscripts, but are much more likely to be conscripts; and (iii) women are relatively rare among long hours workers, and especially long hours volunteers, suggesting long hours jobs may be discriminatory. The research highlights the importance of distinguishing conscripts and volunteers to understand the prevalence and dynamics of long work hours.
    Keywords: working hours, overwork, preferences, HILDA survey
    JEL: J22
    Date: 2006–12
  10. By: Juan J. Dolado (Universidad Carlos III de Madrid, CEPR and IZA Bonn); Eduardo Morales (Harvard University)
    Abstract: This paper analyses the determinants of grades achieved in three core subjects by first-year Economics undergraduate students at Universidad Carlos III de Madrid, over the period 2001-2005. Gender, nationality, type of school, specialization track at high school and the grades at the university entry exam are the key factors we examine. Our main findings are that those students who did a technical track at high school tend to do better in mathematics than those who followed a social sciences degree and, that the latter do not perform significantly better than the former in subjects with less degree of formalism and more economic content. Moreover, students from public schools are predominant in the lower (with social sciences or humanities tracks) and upper (with a technical track) parts of the grade distribution, and females tend to perform better than males.
    Keywords: grade achievement, school type, gender, multinomial logit, quantile regressions
    JEL: I21 I29
    Date: 2006–12
  11. By: Benoit Dostie (HEC Montréal, CIRANO, CIRPÉE and IZA Bonn); David E. Sahn (Cornell University)
    Abstract: In this paper, we estimate a model of labor market dynamics among individuals in Romania using panel data for three years, 1994 to 1996. Our motivation is to gain insight into the functioning of the labor market and how workers are coping during this period of economic liberalization and transformation that began in 1990. Our models of labor market transitions for men and women examine changing movements in and out of employment, unemployment, and self-employment, and incorporate specific features of the Romanian labor market, such as the social safety net. We take into account demographic characteristics, state dependence, and individual unobserved heterogeneity by modeling the employment transitions with a dynamic mixed multinomial logit.
    Keywords: employment dynamics, Romania, multinomial logit, initial conditions, random effects
    JEL: P2 P3
    Date: 2006–12
  12. By: ALBERTO MAYDEU (Instituto de Empresa)
    Abstract: The classical method (Mosteller, 1951) for estimating Thurstone´s Case V model for ranking data consists in a) transforming the observed ranking patterns to patterns of binary paired comparisons, b) obtaining the normal deviate corresponding to the men of each binary variable, and c) estimate the model parameters from these deviates by least squares. However, classical procedures do not take into account the dependencies among the deviates and as a result, asymptotic standard errors (SEs) and goodness of fit (GOF) test are incorrect.
    Keywords: Categorical data analysis, Preference data, Random utility models
    Date: 2006–12

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