nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2011‒01‒30
three papers chosen by
Philip Yu
Hong Kong University

  1. Consistent Estimation of the Fixed Effects Ordered Logit Model By Baetschmann, Gregori; Staub, Kevin; Winkelmann, Rainer
  2. Disability and Multi-State Labour Force Choices with State Dependence By Oguzoglu, Umut
  3. Additive representation of separable preferences over infinite products By Pivato, Marcus

  1. By: Baetschmann, Gregori (University of Zurich); Staub, Kevin (University of Zurich); Winkelmann, Rainer (University of Zurich)
    Abstract: The paper re-examines existing estimators for the panel data fixed effects ordered logit model, proposes a new one, and studies the sampling properties of these estimators in a series of Monte Carlo simulations. There are two main findings. First, we show that some of the estimators used in the literature are inconsistent, and provide reasons for the inconsistency. Second, the new estimator is never outperformed by the others, seems to be substantially more immune to small sample bias than other consistent estimators, and is easy to implement. The empirical relevance is illustrated in an application to the effect of unemployment on life satisfaction.
    Keywords: ordered response, panel data, correlated heterogeneity, incidental parameters
    JEL: C23 C25 J28 J64
    Date: 2011–01
  2. By: Oguzoglu, Umut (University of Manitoba)
    Abstract: I use a dynamic mixed multinomial logit model with unobserved heterogeneity to study the impact of work limiting disabilities on disaggregated labour choices. The first seven waves of the Household Income and Labour Dynamics in Australia survey are used to investigate this relationship. Findings point out to strong state dependence in employment choices. Further, the impact of disability on employment outcomes is highly significant. Model simulations suggest that high cross and own state dependence can amplify a one-off disability shock to alter the probability of full time employment and nonparticipation permanently, especially for low skilled individuals.
    Keywords: disability, employment, dynamic mixed multinomial logit, panel data, HILDA, simulated maximum likelihood
    JEL: J14 J21
    Date: 2010–12
  3. By: Pivato, Marcus
    Abstract: Let X be a set of states, and let I be an infinite indexing set. Our first main result states that any separable, permutation-invariant preference order (>) on X^I admits an additive representation. That is: there exists a linearly ordered abelian group A and a `utility function' u:X-->A such that, for any x,y in X^I which differ in only finitely many coordinates, we have x>y if and only if the sum of [u(x_i)-u(y_i)] over all i in I is positive. Our second result states: If (>) also satisfies a weak continuity condition, then, for any x,y in X^I, we have x>y if and only if the `hypersum' of [u(x_i)-u(y_i)] over all i in I is positive. The `hypersum' is an infinite summation operator defined using methods from nonstandard analysis. Like an integration operator or series summation operator, it allows us to define the sum of an infinite set of values. However, unlike these operations, the hypersum does not depend on some form of convergence (recall: A has no topology) ---it is always well-defined. Also, unlike an integral, the hypersum does not depend upon a sigma-algebra or measure on the indexing set I. The hypersum takes values in a linearly ordered abelian group A*, which is an ultrapower extension of A. These results are applicable to infinite-horizon intertemporal choice, choice under uncertainty, and variable-population social choice.
    Keywords: additive; separable; intertemporal choice; intergenerational choice; risk; uncertainty; variable-population social choice; generalized utilitarian; nonstandard analysis; hyperreal; linearly ordered abelian group; non-Archimedean utility; lexicographical utility
    JEL: D81 D90 D61
    Date: 2011–01–19

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