nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2008‒02‒16
seven papers chosen by
Philip Yu
Hong Kong University

  1. Do irrelevant commodities matter? By Marc Fleurbaey; Koichi Tadenuma
  2. Introducing Unobserved Heterogeneity in Earnings Mobility By Thibault Brodaty
  3. Conformity and the demand for environmental goods By Carlsson, Fredrik; García, Jorge H.; Löfgren, Åsa
  4. A choice experiment on coca cropping By Ibanez, Marcela; Carlsson, Fredrik
  5. Career Progression and Comparative Advantage By Shintaro Yamaguchi
  6. The Use of Pseudo Panel Data for Forecasting Car Ownership By Huang, Biao
  7. Contingent valuation of natural resources: a case study for Sicily By Pasquale Lucio Scandizzo; Marco Ventura

  1. By: Marc Fleurbaey (CERSES - Centre de recherche sens, ethique, société - CNRS : UMR8137 - Université Paris Descartes - Paris V); Koichi Tadenuma
    Abstract: We study how to evaluate allocations independently of individual preferences over unavailable commodities. We prove impossibility results suggesting that such evaluations encounter serious difficulties. This is related to the well-known problem of performing international comparisons of standard of living across countries with different consumption goods. We show how possibility results can be retrieved with restrictions on the domain of preferences, on the application of the independence axiom or on the set of allocations to be ranked. Such restrictions appear more plausible when the objects of evaluation are allocations of composite commodities, characteristics or human functionings rather than ordinary commodities.
    Keywords: consumer preferences; social choice; independence of irrelevant alternatives; characteristics; functionings
    Date: 2007
  2. By: Thibault Brodaty (EUREQUA - Equipe Universitaire de Recherche en Economie Quantitative - CNRS : UMR8594 - Université Panthéon-Sorbonne - Paris I, CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique)
    Abstract: This paper introduces and describes unobserved heterogeneity in earnings quintiles transition matrices in the US. Unobserved heterogeneity is found to play a crucial role in earnings mobility. Each individual is attracted, given his characteristics, towards a specific zone of the distribution. At the stationnary equilibrium, the earnings quintiles distribution is thus segmented. Interestingly, while the level of earnings mobility has remained quite stable since 1970, the width of these zones has decreased, such that this segmentation was more pronounced in the 80's and the 90's than in the 70's, especially in the middle of the quintiles distribution.
    Keywords: earnings mobility; unobserved heterogeneity; segmentation; state dependence; dynamic multinomial logit
    Date: 2007–11–09
  3. By: Carlsson, Fredrik (Department of Economics, School of Business, Economics and Law, Göteborg University); García, Jorge H. (Department of Economics, School of Business, Economics and Law, Göteborg University); Löfgren, Åsa (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: We test the hypothesis that people conform to certain social norms, i.e. that some individuals may be willing to pay a higher price premium for green products the more widespread green consumerism is in society. To investigate consumer preferences for environmentally friendly products, we conducted a choice experiment where the respondents were asked to choose among coffee products varying with respect to their share of ecological beans, share of fair trade beans, and price. Three treatments were used, differing only in the information given about the choices made by other consumers. More specifically, the respondents in the three subgroups were told that 10%, 50%, and 90% of all other consumers chose the alternative with 100% ecological beans. We find different responses to the treatments across individuals. In particular, we can only confirm our hypothesis of conformity for women, although men appear to have stronger preferences for ecological coffee than women.<p>
    Keywords: Conformity; Choice Experiments; Environmental Goods
    JEL: C90 D12
    Date: 2008–02–13
  4. By: Ibanez, Marcela (Department of Economics, School of Business, Economics and Law, Göteborg University); Carlsson, Fredrik (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Between 1997 and 2005, 5.2 billion USD were invested to reduce cocaine production in Colombia, the world’s main cocaine producer. However, little is known about the effectiveness of policies targeting coca cultivation, this paper evaluates the effects of the two main policies: eradication and alternative development. We measure the responsiveness of farmers to eradication and alternative development programs using a survey based experiment. Our results support Becker’s (1968) model of crime participation and in addition shed light on other non-monetary factors that affect the coca cultivation decision. Social norms, legitimacy, and poverty are found to be affecting coca cultivation. We find that the responses are to a large extent consistent, and the model prediction of the proportion of farmer growing coca is accurate. We also illustrate how the results can be used to draw policy conclusions, but conclude that better information about the costs is needed.<p>
    Keywords: Illegal drugs; Choice experiment; Colombia
    JEL: G11 K42 Z12 Z13
    Date: 2008–02–13
  5. By: Shintaro Yamaguchi
    Abstract: This paper constructs and structurally estimates a dynamic occupational choice model that has two distinct features. First, an occupation is vertically and horizontally differentiated by a multidimensional task complexity measure. This allows a simultaneous analysis of career progression and comparative advantage. Second, the model includes hundreds of occupations by characterizing all jobs by a multidimensional task complexity vector, thereby avoiding the curse of dimensionality. Estimation results from the Dictionary of Occupational Titles (DOT) and the National Longitudinal Survey of Youth 1979 (NLSY) indicate that wages increase according to task complexity and that individuals climb up the career ladder along the dimension of tasks in which they have a comparative advantage.
    Keywords: Career decisions, dynamic stochastic discrete choice model
    Date: 2008–02
  6. By: Huang, Biao
    Abstract: While car ownership forecasting has always been a lively area of research, traditionally it was dominated by static models. To utilize the rich and readily available repeated cross sectional data sources and avoid the need for scarce and expensive panel data, this study adopts pseudo panel methods. A pseudo panel dataset is constructed using the Family Expenditure Survey between 1982 and 2000 and a range of econometric models are estimated. The methodological issues associated with the properties of various pseudo panel estimators are also discussed. For linear pseudo panel models, the methodological issues include: the relationship between the pseudo panel estimator and instrumental variable estimator based on individual survey data; the problem of measurement errors (and when they can be ignored) and the consistent estimation of dynamic pseudo panel parameters under different asymptotics. Static and dynamic models of car ownership are estimated and a systematic specification search is carried out to determine the model with best fit. The robustness of the estimator is investigated using parametric bootstrap techniques. As an individual household’s car ownership choice is discrete, limiting the model to linear form is obvious insufficient. This study attempts to combine the pseudo panel approach with discrete choice model, which has the distinctive advantages of allowing both dynamics and saturation but without the need for expensive genuine panel data. This does not seem to have been done before. Under the framework of random utility model (RUM), it is shown that the utility function of the pseudo panel model is a direct transformation from that of cross-sectional model and both share similar probability model albeit with different scale. This study also explores the various forms of true state dependence in the dynamic models and tackles the difficult econometric issues caused by the inclusion of lagged dependent variables. The pseudo panel random utility model is then applied to car ownership modeling, which is subsequently extended to take saturation into account. The model with the best fit has a Dogit structure, which is consistent with the RUM theory and is able to estimate the level of saturation and test its statistical significance. Both linear and discrete choice models are applied to generate forecasts of car ownership in Great Britain to year 2021. While the forecasts based on discrete choice models closely match the observed car stock between 2001 and 2006, those based on linear models appear to be too high. Furthermore, the results from nonlinear models are comparable to the findings in other authoritative studies, while the long term forecasts from linear models are significantly higher. These results highlight the importance of saturation, and hence the choice of model functional form, in car ownership forecasts. In conclusion, we make some comments about the usefulness of pseudo panel models.
    Keywords: pseudo panel; discrete choice model; dynamics; saturation; car ownership
    JEL: C53 C23 C35
    Date: 2007–06
  7. By: Pasquale Lucio Scandizzo (University of Tor Vergata, Dept. SEFEMEQ, Faculty of Economics); Marco Ventura (ISAE - Institute for Studies and Economic Analyses)
    Abstract: In this paper we use the Contingent Evaluation methodology to develop an economic evaluation of natural resources in a protected marine area of Sicily. Assuming a non-Normal distribution for the ML estimation, the paper shows that a variant of the stochastic utility model appears to capture well the dependence of the willingness to pay (WTP) on the socioeconomic characteristics of a sample of stakeholders of the natural resources in question. The estimates obtained are consistent and robust across different policy measures, no embedding or sequencing effects emerge and option values appear also to have been elicited in a consistent way. Once these values are added to the basic WTP, the income elasticities estimated fall in the range reported by other studies.
    Keywords: environment, option value, contingent valuation, legal constraints.
    JEL: Q22 Q28
    Date: 2008–01

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