nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2010‒05‒02
four papers chosen by
Philip Yu
Hong Kong University

  1. Modeling Employment Dynamics with State Dependence and Unobserved Heterogeneity By Prowse, Victoria L.
  2. We Know What You Choose! External Validity of Discrete Choice Models By R. Karina Gallardo; Jaebong Chang
  3. Individual Characteristics and Stated Preferences for Alternative Energy Sources and Propulsion Technologies in Vehicles: A Discrete Choice Analysis By Andreas Ziegler
  4. Is the Welfare State Sustainable? Experimental Evidence on Citizens' Preferences for Redistribution By Neustadt, Ilja; Zweifel, Peter

  1. By: Prowse, Victoria L. (University of Oxford)
    Abstract: This paper extends existing work on labor force participation dynamics by distinguishing between full-time and part-time employment and allowing unobserved heterogeneity in the effects of previous employment outcomes, children and education on employment dynamics. The results reveal significant autocorrelation in unobservables, and significant variation in the effects of children and education on labor supply preferences. Moreover, omission of random coeffcients or autocorrelation can bias significantly estimates of policy effects. On average, policies temporarily incentivizing part-time and full-time employment are equally effective tools for reducing non-employment. However, non-employment among women with young children is more responsive to policies encouraging part-time rather than full-time work.
    Keywords: discrete labor supply, unobserved heterogeneity, state dependence, repeated multinomial choice
    JEL: C15 C25 J6 J22
    Date: 2010–04
  2. By: R. Karina Gallardo; Jaebong Chang (School of Economic Sciences, Washington State University)
    Abstract: For over the last thirty years the multinomial logit model has been the standard in choice modeling. Development in econometrics and computational algorithms has led to the increasing tendency to opt for more flexible models able to depict more realistically choice behavior. This study compares three discrete choice models, the standard multinomial logit, the error components logit, and the random parameters logit. Data were obtained from two choice experiments conducted to investigate consumers’ preferences for fresh pears receiving several postharvest treatments. Model comparisons consisted of in-sample and holdout sample evaluations. Results show that product characteristics hence, datasets, influence model performance. We also found that the multinomial logit model outperformed in at least one of three evaluations in both datasets. Overall, findings signal the need for further studies controlling for context and dataset to have more conclusive cues for discrete choice models capabilities.
    Keywords: discrete choice models, validation, holdout sample
    JEL: C25 D12
    Date: 2010–04
  3. By: Andreas Ziegler (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland)
    Abstract: This paper empirically examines the determinants of the demand for alternative energy sources and propulsion technologies in vehicles. The data stem from a stated preference discrete choice experiment with 598 potential car buyers. In order to simulate a realistic automobile purchase situation, seven alternatives were incorporated in each of the six choice sets, i.e. hybrid, gas, biofuel, hydrogen, and electric as well as the common fuels gasoline and diesel. The vehicle types were additionally characterized by a set of attributes, such as purchase price or motor power. Besides these vehicle attributes, our study particularly considers a multitude of individual characteristics, such as socio-demographic and vehicle purchase variables. The econometric analysis with multinomial probit models identifies some population groups with a higher propensity for alternative energy sources or propulsion technologies in vehicles, which can be focused by policy and automobile firms. For example, younger people and people who usually purchase environment-friendly products have a higher stated preference to purchase biofuel, hydrogen, and electric automobiles than other population groups. Methodologically, our study highlights the importance of the inclusion of taste persistence across the choice sets. Furthermore, it suggests a high number of random draws in the Geweke-Hajivassiliou-Keane simulator, which is incorporated in the simulated maximum likelihood estimation and the simulated testing of statistical hypotheses.
    Keywords: Alternative energy sources and propulsion technologies in vehicles, stated preferences, discrete choice, multinomial probit models, unobserved heterogeneity, simulated maximum likelihood estimation
    JEL: R41 C25 C15 Q54 Q58
    Date: 2010–03
  4. By: Neustadt, Ilja; Zweifel, Peter
    Abstract: The sustainability of the welfare state ultimately depends on citizens' preferences for income redistribution. They are elicited through a Discrete Choice Experiment performed in 2008 in Switzerland. Attributes are redistribution as GDP share, its uses (the unemployed, old-age pensioners, people with ill health etc.), and nationality of beneficiary. Estimated marginal willingness to pay (WTP) is positive among those who deem benefits too low, and negative otherwise. However, even those who state that government should reduce income inequality exhibit a negative WTP on average. The major finding is that estimated average WTP is maximum at 21% of GDP, clearly below the current value of 25%. Thus, the present Swiss welfare state does not appear sustainable.
    Keywords: Income redistribution; welfare state; sustainability; preferences; willingness to pay; discrete choice experiments
    JEL: D63 H31 D12 H29 C35 C93
    Date: 2010–02–28

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