nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2008‒09‒13
seven papers chosen by
Philip Yu
Hong Kong University

  1. Modeling Ordered Choices: A Primer and Recent Developments By William H. Greene; David A. Hensher
  2. Determinants of land use changes: a spatial multinomial probit approach By Olivier Parent; Raja Chakir
  3. Habit Formation, Information Exchange and the Social Geography of Demand By Babutsidze, Zakaria; Cowan, Robin
  4. Labor Supply Responses of Italian Women to Minimum Income Policies By Ana Laura Mancini
  5. Long-term adaptation : selecting farm types across agro-ecological zones in Africa By Seo, Niggol; Mendelsohn, Robert; Dinar, Ariel; Kurukulasuriya, Pradeep; Hassan, Rashid
  6. Assessing the redistributive effect of fiscal policy By Essama-Nssah, B.
  7. A Choice Modelling Approach for Assessment of Use and Quasi-Option Values in Urban Planning for Areas of Environmental Interest By Elisabetta Strazzera; Elisabetta Cherchi; Silvia Ferrini

  1. By: William H. Greene; David A. Hensher
    Date: 2008
  2. By: Olivier Parent; Raja Chakir
    Abstract: Changes in land use patterns impact significantly environmental conditions as well as economic and social welfare. These changes are influenced by socio-economic as well as pedo-climatic factors. A good understanding of how these factors influence land use patterns would provide new dimensions to policy making and public policy evaluation. To this end, we propose a Spatial Multinomial Probit model to examine the determinants of land use change, at the parcel level, in the French D´epartement du Rhones from 1992 to 2003. It is based on an economic model that assumes that landowners have a choice between 4 land use categories for a given parcel at a given date: (1) agricultural, (2) forest, (3) urban and (4) no use. Each landowner compares costs and benefits associated with each parcel and each class and chooses the optimal land use to maximize his/her profit. We propose a Spatial Multinomial Probit model that allows for covariates and spatial dependence, and we use these features to explore the relative importance of factors that drive landowners to choose a specific land use category. Our findings suggest the presence of spatial patterns, implying that the decision to choose land use for a given parcel of land is strongly influenced by nonobserved factors in neighboring parcels. Moreover, results confirm that interdependencies among land use alternatives, accounted for in the spatial multinomial probit model by the correlation structure, are required for the estimation of land use decision.
    Date: 2008
  3. By: Babutsidze, Zakaria (UNU-MERIT); Cowan, Robin (UNU-MERIT, Maastricht University, BETA, University of Strasbourg)
    Abstract: This paper is concerned with clustering in demand. We present a discrete choice model of consumption that incorporates habit formation and information exchange among consumers in fixed social networks. We provide an analytical solution to a special case of the model by using technical tools from chemistry and biology. We demonstrate the validity of these results for the general case numerically. It is shown that clustering in demand is a solution to the complex system we are analyzing, and that clustering pattern can be short-term or long-lasting depending on the characteristics of the society.
    Keywords: demand, clustering, information, partial differential equations
    JEL: C65 D11 D83
    Date: 2008
  4. By: Ana Laura Mancini (Child - Collegio Carlo Alberto and University of Turin)
    Abstract: Minimum income policies are policies aimed at guarantee all citizens with a minimum level of income and at fighting social exclusion typically associated with extreme poverty. Theoretically, their main shortcoming is the disincentive effect on labour market participation they could generate in the bottom part of income distribution, due to the high effective marginal tax rate they impose around the threshold level. This paper employs a structural labor supply model under discrete choices to test the existence and the magnitude of this disincentive effect on Italian female labor supply. Our empirical results show that family structure is crucial in determining the existence of a disincentive effect: only married women experience it, while single women participation rates increase under all possible minimum income schemes. The magnitude of both the positive and the negative effect depend on the policy design
    Keywords: Labor supply, welfare transfers, tax-benefit system, microsimulation.
    JEL: J22 C25 H31 C25
    Date: 2008
  5. By: Seo, Niggol; Mendelsohn, Robert; Dinar, Ariel; Kurukulasuriya, Pradeep; Hassan, Rashid
    Abstract: Using economic data from more than 8,500 household surveys across 10 African countries, this paper examines whether the choice of farm type depends on the climate and agro-ecological zone of each farm. The paper also studies how farm type choice varies across farmers in each zone, using a multinomial logit choice model. Farmers are observed to choose from one of the following five types of farms: rainfed crop-only, irrigated crop-only, mixed rainfed (crop and livestock), mixed irrigated, and livestock-only farming. The authors compare current decisions against future decisions as if the only change were climate change. They focus on two climate scenarios from existing climate models: the Canadian Climate Centre scenario, which is hot and dry, and the Parallel Climate Model scenario, which is mild and wet. The results indicate that the change in farm types varies dramatically by climate scenario but also by agro-ecological zone. Policy makers must be careful to encourage the appropriate suite of measures to promote the most adapted farm type to each location.
    Keywords: Crops&Crop Management Systems,Climate Change,Agriculture&Farming Systems,Livestock&Animal Husbandry,Rural Development Knowledge&Information Systems
    Date: 2008–04–01
  6. By: Essama-Nssah, B.
    Abstract: Who benefits from public spending? Who bears the burden of taxation? How desirable is the distribution of net benefits from the operation of a tax-benefit system? This paper surveys basic concepts, methods, and modeling approaches commonly used to address these issues in the context of fiscal incidence analysis. The review covers the incidence of both taxation and public spending. Methodological points are supported by country cases. The effective distribution of benefits and burdens associated with fiscal policy depends on the size of the government, the distributive mechanisms involved, and the incentives properties of the policy under consideration. This creates a need for analytical methods to account for both individual behavior and social interaction. The approaches reviewed include simple reduced form regression analysis, microsimulation models (both the envelope and discrete choice models), computable general equilibrium modeling, and approaches that link computable general equilibrium models to microsimulation models. Explicit modeling facilitates the construction of counterfactuals to back up causal analysis. Social desirability is assessed on the basis of progressivity along with deadweight loss.
    Keywords: Taxation&Subsidies,Emerging Markets,Economic Theory&Research,,Debt Markets
    Date: 2008–04–01
  7. By: Elisabetta Strazzera (University of Cagliari); Elisabetta Cherchi (DIT and CIREM, University of Cagliari); Silvia Ferrini (DEPFID, University of Siena, CSERGE and University of East Anglia)
    Abstract: This study adopts a discrete choice modelling methodology to evaluate individuals’ preferences over planning alternatives for an urban site of environmental interest. Since such projects involve some uncertainty and irreversibility, a special attention is devoted to the estimation of the quasi-option values which are associated to project development. Two distinct measures for the quasi-option value are estimated, and both coefficients indicate that the public places a significant value on reduction of the possibility of adverse irreversible effects: a more prudent development strategy is valued about four times more than a procedure that provides a lesser hedge against undesired outcomes. Furthermore, the study involved elicitation of intertemporal preferences over projects with different time spans, and estimation of the implicit discount rates: the values obtained seem high if compared to standard discount rates applied to public projects, but not far from current interest rates on consumption.
    Keywords: Urban Planning, Environmental Values, Choice Modelling, Use Values, Quasi-option Values, Discounting
    JEL: C35 Q51 R41
    Date: 2008–07

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