nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2008‒10‒07
four papers chosen by
Philip Yu
Hong Kong University

  1. Taste Heterogeneity, IIA, and the Similarity Critique By Thomas J. Steenburgh; Andrew Ainslie
  2. Subjective Health Assessments and Active Labor Market Participation of Older Men: Evidence from a Semiparametric Binary Choice Model with Nonadditive Correlated Individualspecific Effects By Jürgen Maurer; Roger Klein; Francis Vella
  3. On the Determinants and Implications of School Choice: Semi-Structural Simulations for Chile By Francisco Gallego; Andrés E. Hernando.
  4. Rationality in a general model of choice By Lahiri, Somdeb

  1. By: Thomas J. Steenburgh (Harvard Business School, Marketing Unit); Andrew Ainslie (UCLA Anderson, School of Management)
    Abstract: The purpose of this paper is to show that allowing for taste heterogeneity does not address the similarity critique of discrete-choice models. Although IIA may technically be broken in aggregate, the mixed logit model allows neither a given individual nor the population as a whole to behave with perfect substitution when facing perfect substitutes. Thus, the mixed logit model implies that individuals behave inconsistently across choice sets. Estimating the mixed logit on data in which individuals do behave consistently can result in biased parameter estimates, with the individuals' tastes for desirable attributes being systemically undervalued.
    Keywords: Heterogeneity, Mixed Logit, Independence from Irrelevant Alternatives, IIA, Similarity Critique, Ecological Fallacy
    Date: 2008–09
  2. By: Jürgen Maurer; Roger Klein; Francis Vella (Mannheim Research Institute for the Economics of Aging (MEA))
    Abstract: We use panel data from the US Health and Retirement Study 1992-2002 to estimate the effect of self-assessed health limitations on active labor market participation of men around retirement age. Self-assessments of health and functioning typically introduce an endogeneity bias when studying the effects of health on labor market participation. This results from justification bias, reflecting an individual’s tendency to provide answers which "justify" his labor market activity, and individual-specific heterogeneity in providing subjective evaluations. We address both concerns. We propose a semiparametric binary choice procedure which incorporates potentially nonadditive correlated individual-specific effects. Our estimation strategy identifies and estimates the average partial effects of health and functioning on labor market participation. The results indicate that poor health and functioning play a major role in the labor market exit decisions of older men.
    JEL: I10 J10 J26 C14 C30
    Date: 2008–09–23
  3. By: Francisco Gallego (Instituto de Economía. Pontificia Universidad Católica de Chile.); Andrés E. Hernando.
    Abstract: This paper studies the implications of school choice in the context of the Chilean quasivoucher system. We use information of school choices of about 80,000 students that lived in the Metropolitan Area of Santiago in Chile in 2002 and the results of the discrete choice model estimated in Gallego and Hernando (2008) to perform a number of exercises aimed at quantifying what we call the “value of choice” (i.e. how much do households gain from a school choice system?) against a number of counterfactuals that restrict school choice in several dimensions (geographic choice, the existence of top ups, and the supply of voucher schools). We also (i) analyze the effects on socioeconomic segregation of students and (ii) study the potential effects of introducing a non-flat voucher that is decreasing in students’ SES. Our results suggest that overall, school choice seems to be valuable to households, but there is a lot of heterogeneity in its value. In some simulations, school choice is regressive (as when lotteries are used to allocate students to current schools; or when we consider the effects of the increase in the supply of voucher schools) and in other progressive (when students are allowed to choose outside the county in which they live). Interestingly, policies that restrict the use of top ups to the voucher do not seem to reduce segregation in a significant way. This contrasts with the introduction of a differentiated voucher, which would mostly benefit the poor and even compensate them for loses from some dimensions of school choice observed in particular groups.
    Keywords: School choice, Chile, Vouchers, Segregation, Structural estimates, Parents preferences
    JEL: I20 I21 I22 I28
    Date: 2008
  4. By: Lahiri, Somdeb
    Abstract: In this paper we consider choice correspondences which may be empty-valued. We study conditions under which such choice correspondences are rational, transitively rational, partially rational, partially almost transitive rational, partially almost quasi-transitive rational.
    Keywords: choice correspondence; rational; almost transitive; almost quasi-transitive
    JEL: D71 C61
    Date: 2008–09–29

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