nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2009‒06‒17
five papers chosen by
Philip Yu
Hong Kong University

  1. Misspecification and Heterogeneity in Single-Index, Binary Choice Models By Chen, Pian; Velamuri, Malathi
  2. Emotions, competence and confidence in choice under uncertainty By Anna MAFFIOLETTI; Michele SANTONI
  3. Incorporation and Taxation: Theory and Firm-level Evidence By Peter Egger; Christian Keuschnigg; Hannes Winner
  4. "Farm Size, Productivity, and Speculative Motives in Agricultural Land: Why Japanese Farmers are So Small in Scale?" (in Japanese) By Hiroshi Ohashi; Keiji Saito
  5. The internationalisation of the automotive supply chain: empirical evidence from Italian firms By Emanuele BACCHIOCCHI; Massimo FLORIO; Anna GIUNTA

  1. By: Chen, Pian; Velamuri, Malathi
    Abstract: We propose a nonparametric approach for estimating single-index, binary-choice models when parametric models such as Probit and Logit are potentially misspecified. The new approach involves two steps: first, we estimate index coefficients using sliced inverse regression without specifying a parametric probability function a priori; second, we estimate the unknown probability function using kernel regression of the binary choice variable on the single index estimated in the first step. The estimated probability functions for different demographic groups indicate that the conventional dummy variable approach cannot fully capture heterogeneous effects across groups. Using both simulated and labor market data, we demonstrate the merits of this new approach in solving model misspecification and heterogeneity problems.
    Keywords: Probit; Logit; Sliced Inverse Regression; categorical variables; treatment heterogeneity
    JEL: C14 C52 C21
    Date: 2009–05
  2. By: Anna MAFFIOLETTI; Michele SANTONI
    Abstract: This paper presents the results of two experiments testing reaction to risk and uncertainty of a sample of 66 Italian university students. Risky prospects were based on games of chance, while uncertain lotteries were based on the forthcoming results of either the May 2001 Italian general political election or the June 2004 election for the European Parliament. We computed decision weights for risk and uncertainty; we also collected data as regards the subjects’ degree of belief, expressed by probability judgements, for the same uncertain events. Our results show that the subjects’ behaviour is consistent with expected utility theory as regards risk, but not under uncertainty. In particular, our subjects show a strong superadditivity in the decision weights and the possibility effect (lower subadditivity) is stronger than the certainty effect (upper subadditivity). There is also evidence that emotions, actual competence and confidence positively affect the possibility effect, whereas they do not have any influence on the certainty effect, reinforcing the lack of symmetry between the two effects
    Keywords: Uncertainty, Subadditivity, Emotions, Competence, Confidence
    JEL: D81
    Date: 2007–09–18
  3. By: Peter Egger (Ifo Institute, University of Munich, WIFO and CESifo); Christian Keuschnigg (University of St. Gallen (IFF-HSG)); Hannes Winner (University of Salzburg)
    Abstract: This paper provides a theory and firm-level evidence on the incorporation decision of entrepreneurs in a model of taxes and corporate governance. The theory explains how the incorporation decision of entrepreneurs is driven by taxation (corporate and personal income taxes), corporate transparency, access to external capital and limited liability. We estimate features of this model using a large cross-section of more than 540, 000 firms in European manufacturing. We find that higher personal income tax rates favor incorporation while higher corporate tax rates reduce the probability to incorporate. These findings are robust to the inclusion of other economic and institutional determinants of external financing and choice of organizational form.
    Keywords: Incorporation, governance, taxes, discrete choice models
    JEL: H25 H73 F23 C21
    Date: 2009
  4. By: Hiroshi Ohashi (Faculty of Economics, University of Tokyo); Keiji Saito (National Institute of Science and Technology Policy)
    Abstract: This paper examines the effect of speculative motives in agricultural land on farm size and labor productivity in Japan, by use of the prefecture- and size-level census panel data in the period from 1990 to 2005. The paper employs a discrete choice model to formulate the farm behavior in the choice of land size (including exit), and then simulates the model to assess the counterfactual situation in the absence of speculative motives. While it identifies the existence of strong increasing returns, the paper finds that speculative motives in agricultural land do account for why Japanese farm size is small in scale. Our simulation result reveals that in the absence of the speculations, farm size would have become larger by 30 percent and labor productivity increased by more than 20 percent.
    Date: 2009–01
  5. By: Emanuele BACCHIOCCHI; Massimo FLORIO; Anna GIUNTA
    Abstract: The aim of this paper is to study the characteristics of the internationalisation process and to identify its determinants in a representative sample of 786 firms in the Italian automotive chain. We carried out a a multinomial logit and an ordered probit analyses. The main findings of the econometric analyses based on the available micro-evidence are that: a) the firms in the Italian supply chain engage in complex modes of internationalisation; b) the individual firm’s characteristics play a significant role in the probability of internalization; c) the firms located in the province of Turin have a clear localisation advantage, because of an “industrial district” effect. We also observe that internationalisation is negatively correlated to the share of Fiat, the Italian dominant car maker, in the supplier’s sales
    Keywords: Internationalisation, Firm Behaviour, Auto Industry, Qualitative Choice Models
    JEL: D21 L62 F23 C25
    Date: 2008–10–13

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