nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2012‒05‒15
three papers chosen by
Philip Yu
Hong Kong University

  1. Never give up? The persistence of welfare participation in Sweden By Andrén, Daniela; Andrén, Thomas
  2. A Tractable Consideration Set Structure for Network Revenue Management By Arne Strauss; Kalyan Talluri
  3. Offsetting versus Mitigation Activities to Reduce CO2 Emissions: A Theoretical and Empirical Analysis for the U.S. and Germany By Andreas Lange; Andreas Ziegler

  1. By: Andrén, Daniela (Department of Business, Economics, Statistics and Informatics); Andrén, Thomas (National Institute of Economic Research and IZA)
    Abstract: Welfare persistence is estimated and compared between Swedish-born and foreign-born households during the 1990s. This is done within the framework of a dynamic discrete choice model controlling for the initial condition and permanent unobserved heterogeneity. We control for three types of persistence in terms of observed and unobserved heterogeneity, serial correlation, and structural state dependence, the focus being on the latter measure. The results show that state dependence in Swedish welfare participation was strong. This effect was three times as large for the foreign-born compared to Swedish-born, but when this effect is distributed over time, it disappears after three years for both groups. Contrary to previous studies, our results for foreignborn are that both country of origin and time in the country of destination have only small impacts on welfare participation.
    Keywords: social assistance; welfare persistence; state dependence; unobserved heterogeneity; initial condition; dynamic probit model; GHK simulator
    JEL: I30 I38 J18
    Date: 2012–05–09
  2. By: Arne Strauss; Kalyan Talluri
    Abstract: The dynamic program for choice network RM is intractable and approximated by a deterministic linear program called the CDLP. When the segment consideration sets overlap, the CDLP is difficult to solve. A weaker formulation (SDCP+) is tractable and approximates the CDLP value very closely. We show that if the segment consideration sets follow a tree structure, the two problems are equivalent, and give a counterexample to show that cycles can induce a gap between CDLP and the relaxation.
    Keywords: discrete-choice models, network revenue management, consideration sets
    JEL: C61 L93 L83 M11
    Date: 2012–02
  3. By: Andreas Lange (University of Hamburg, Germany); Andreas Ziegler (University of Kassel, Germany, and ETH Zurich, Switzerland)
    Abstract: This paper studies the voluntary provision of public goods that is partially driven by a desire to offset for individual polluting activities. We first extend existing theory and show that offsets allow a reduction in effective environmental pollution levels while not necessarily extending the consumption of a polluting good. We further show a nonmonotonic income-pollution relationship and derive comparative static results for the impact of an increasing environmental preference on purchases of offsets and mitigation activities. Several theoretical results are then econometrically tested using a novel data set on activities to reduce CO2 emissions for the case of vehicle purchases in the U.S. and Germany. We show that an increased environmental preference triggers the use of CO2 offsetting and mitigation channels in both countries. However, we find strong country differences for the purchase of CO2 offsets. While such activities are already triggered by a high general awareness of the climate change problem in the U.S., driver’s license holders in Germany need to additionally perceive road traffic as being responsible for CO2 emissions to a large extent.
    Keywords: public good, voluntary provision, climate change, CO2 offsetting, vehicle purchase, discrete choice models
    JEL: C25 C35 H41 Q54
    Date: 2012–05

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