nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2010‒04‒04
three papers chosen by
Philip Yu
Hong Kong University

  1. The Origins of Terrorism: Cross-Country Estimates on Socio-Economic Determinants of Terrorism By Andreas Freytag; Jens J. Krüger; Daniel Meierrieks
  2. The Distinction between Dictatorial and Incentive Policy Interventions and its Implication for IV Estimation By Belzil, Christian; Hansen, Jörgen
  3. On Non-binary Personal Preferences in Society, Economic Theory and Racial Discrimination By Naqvi, Nadeem

  1. By: Andreas Freytag; Jens J. Krüger; Daniel Meierrieks
    Abstract: As a prerequisite of an appropriate anti-terror strategy, it is indispensable to assess the underlying causes of terror. We examine social and economic conditions in the country of origin of terrorist attacks, claiming that low opportunity costs of terror, e.g., approximated by slow growth and poor institutions raise the likelihood of terror and the willingness in the population to support terror. Using a negative binomial regression model, we are able to show that unfortunate socio-economic conditions in a country are likely to reduce the opportunity costs of potential terrorists and increase the number of terrorist attacks originating from a specific country. Interestingly, this effect is particularly relevant after a certain level of development has been reached. We therefore distinguish between several broad country groups, namely the OECD, Europe and Islamic countries.
    Keywords: terror attacks, openness, discrete choice analysis, institutions
    JEL: P16 F15 C25
    Date: 2010
  2. By: Belzil, Christian (Ecole Polytechnique, Paris); Hansen, Jörgen (Concordia University)
    Abstract: We investigate if, and under which conditions, the distinction between dictatorial and incentive-based policy interventions affects the capacity of Instrument Variable (IV) methods to estimate the relevant treatment effect parameter of an outcome equation. The analysis is set in a non-trivial framework, in which the right-hand side variable of interest is affected by selectivity, and the error term is driven by a sequence of unobserved life-cycle endogenous choices. We show that, for a wide class of outcome equations, incentive-based policies may be designed so to generate a sufficient degree of post-intervention randomization (a lesser degree of selection on individual endowments among the sub-population affected). This helps the instrument to fulfill the orthogonality condition. However, for a same class of outcome equation, dictatorial policies that enforce minimum consumption cannot meet this condition. We illustrate these concepts within a calibrated dynamic life cycle model of human capital accumulation, and focus on the estimation of the returns to schooling using instruments generated from mandatory schooling reforms and education subsidies. We show how the nature of the skill accumulation process (substitutability vs complementarity) may play a fundamental role in interpreting IV estimates of the returns to schooling.
    Keywords: returns to schooling, instrumental variable methods, dynamic discrete choice, dynamic programming, local average treatment effects
    JEL: B4 C1 C3
    Date: 2010–03
  3. By: Naqvi, Nadeem
    Abstract: This paper examines some of the consequences for economic theory of the replacement of binary personal preferences by non-binary personal preferences in an Arrow-Debreu society as in Debreu (1959), and reaches the conclusion that there is both much damage to existing theory and greater opportunity for providing formal explanations of such phenomena as discrimination, personal freedoms and power, among others, which are impossible to explain at a formal level on the basis of an economic theory that is founded on a choice theory that is based exclusively on binary relational personal preferences.
    Keywords: Choice theory; decision theory; preference; binary relational logic; non-binary relational logic; utility function; expected utility; game theory; theory of value; discrimination; race; gender
    JEL: E0 D0 B0 C0 J0
    Date: 2010–03–20

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