nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2010‒10‒02
four papers chosen by
Philip Yu
Hong Kong University

  1. On the Looting of Nations By Mare Sarr; Erwin Bulte; Chris Meissner; Tim Swanson
  2. Labour Supply, Work Effort and Contract Choice: Theory and Evidence on Physicians By Bernard Fortin; Nicolas Jacquemet; Bruce S. Shearer
  3. Scale Sensitivity and Question Order in the Contingent Valuation Method By Andersson, Henrik; Svensson, Mikael
  4. Career progression and formal versus on-the-job training By Jerome Adda; Christian Dustmann; Costas Meghir; Jean-Marc Robin

  1. By: Mare Sarr; Erwin Bulte; Chris Meissner; Tim Swanson
    Abstract: We develop a dynamic discrete choice model of an unchecked ruler making decisions regarding the development of a resource-rich country. Resources serve as collateral and facilitate the acquisition of loans. The ruler chooses either to stay in power while facing the risk of being ousted, or loot the country’s riches by liquefying the resources through lending. We show that unstructured lending from international credit markets can create incentives to loot the country; and an enhanced likelihood of looting causes greater political instability, and diminishes growth. Using a treatment effects model, we find strong evidence that supports our predictions.
    Keywords: Natural Resource Curse; Economic Growth; Dictatorship; Looting; Odious Debt
    JEL: O11 O13 O16
    Date: 2010
  2. By: Bernard Fortin; Nicolas Jacquemet; Bruce S. Shearer
    Abstract: We develop and estimate a generalized labour supply model that incorporates work effort into the standard consumption-leisure trade-off. We allow workers a choice between two contracts: a piece rate contract, wherein he is paid per unit of service provided, and a mixed contract, wherein he receives an hourly wage and a reduced piece rate. This setting gives rise to a nonconvex budget set and an efficient budget constraint (the upper envelope of contract-specific budget sets). We apply our model to data collected on specialist physicians working in the Province of Quebec (Canada). Our data set contains information on each physician’s labour supply and their work effort (clinical services provided per hour worked). It also covers a period of policy reform under which physicians could choose between two compensation systems: the traditional fee-for-service, under which physicians receive a fee for each service provided, and mixed remuneration, under which physicians receive a per diem as well as a reduced fee for service. We estimate the model using a discrete choice approach. We use our estimates to simulate elasticities and the effects of ex ante reforms on physician contracts. Our results show that physician services and effort are much more sensitive to contractual changes than is their time spent at work. Our results also suggest that a mandatory reform, forcing all physicians to adopt the mixed remuneration system, would have had substantially larger effects on physician behaviour than those observed under the voluntary reform. <P>
    Keywords: Labour supply, effort, contracts, practice patterns of physicians, discrete choice econometric models, mixed logit,
    JEL: C25 J22 J33 I10 J44
    Date: 2010–09–01
  3. By: Andersson, Henrik; Svensson, Mikael
    Abstract: This study examines the effect on respondents' willingness to pay to reduce mortality risk by the order of the question in a stated preference study. Using answers from an experiment conducted on a Swedish sample where respondents’ cognitive ability was measured and where they participate in a contingent valuation survey it is found that scale sensitivity is the strongest when respondents are asked about a smaller risk reduction first (“Bottom-up” approach). This contradicts some previous evidence in the literature. It is also found that the respondents’ cognitive ability is correlated with their answers being line with theoretical predictions. The latter being important for the validity of the answers. Hence, the results of this paper suggest that scale sensitivity is related to the order of the questions and to respondents’ cognitive ability.
    Keywords: Cognitive ability, contingent valuation, mortality risk, order effect, scale sensitivity
    JEL: D80 I10
    Date: 2010–04
  4. By: Jerome Adda (Institute for Fiscal Studies and European University Institute); Christian Dustmann (Institute for Fiscal Studies and University College London); Costas Meghir (Institute for Fiscal Studies and University College London); Jean-Marc Robin (Institute for Fiscal Studies and EUREQua, University of Paris 1)
    Abstract: <p><p>We evaluate the German apprenticeship system, which combines on-the-job training with classroom teaching, by modelling individual careers from the choice to join such a scheme and followed by their employment, job to job transitions and wages over the lifecycle. Our data is drawn from administrative records that report accurately job transitions and pay. We find that apprenticeships increase wages, and change wage profiles with more growth upfront, while wages in the non-apprenticeship sector grow at a lower rate but for longer. Non-apprentices face a much higher variance to the shocks of their match specific effects and a substantially larger variance in initial level of the offered wages. We find no evidence that qualified apprentices are harder to reallocate following job loss. The average life-cycle return to an apprenticeship career is about 14% and the return is mainly driven by the differences in the wage profile.</p></p>
    Keywords: Apprenticeship Training, Job Mobility, Labour Supply, Wages, Wage Determination, Matching, Wage Growth, Dynamic Discrete Choice, In-work Benefits, EITC, Education
    Date: 2010–09

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