nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2012‒12‒22
three papers chosen by
Philip Yu
Hong Kong University

  1. An Exponential Class of Dynamic Binary Choice Panel Data Models with Fixed Effects By Al-Sadoon, Majid M.; Li, Tong; Pesaran, M. Hashem
  2. Preferences for lifetime earnings, earnings risk and nonpecuniary attributes in choice of higher education By Lars Johannessen Kirkebøen
  3. Estimating net chid care price elasticities of partnered women with pre-school children using a discrete structural labour supply-child care model By Xiaodong Gong; Robert Breunig

  1. By: Al-Sadoon, Majid M. (Universitat Pompeu Fabra); Li, Tong (Vanderbilt University); Pesaran, M. Hashem (University of Cambridge)
    Abstract: This paper develops a model for dynamic binary choice panel data that allows for unobserved heterogeneity to be arbitrarily correlated with covariates. The model is of the exponential type. We derive moment conditions that enable us to eliminate the unobserved heterogeneity term and at the same time to identify the parameters of the model. We then propose GMM estimators that are consistent and asymptotically normally distributed at the root-N rate. We also study the conditional likelihood approach, which can only identify the effect of state dependence in our case. Monte Carlo experiments demonstrate the finite sample performance of our GMM estimators.
    Keywords: dynamic discrete choice, fixed effects, panel data, initial values, GMM, CMLE
    JEL: C23 C25
    Date: 2012–11
  2. By: Lars Johannessen Kirkebøen (Statistics Norway)
    Abstract: Expected earnings are considered to influence individuals' choice of education. However, the presence of nonpecuniary attributes and the different choice set available to prospective students make identification of this relationship difficult. This paper employs a conditional logit model on exceptionally rich application data, which are likely to reflect the actual preferences of the applicants, given their individual choice sets. Controlling for several nonpecuniary attributes, average lifetime earnings is shown to strongly influence educational choice. A one-percent earnings increase for a given education increases the number of male applicants by about 5 percent and female applicants by about 2 percent. However, other attributes also matter, in particular earnings risk. Increasing both earnings and risk as they correlate in the cross section has essentially no effect on the number of female applicants. Difference in earnings and risk preferences both contribute to a gender earnings differential. Finally, there is some preference heterogeneity by education chosen.
    Keywords: Rank-ordered logit; nested logit; field of study
    JEL: J24 J31 C25
    Date: 2012–12
  3. By: Xiaodong Gong (National Centre for Social and Economic Modelling, University of Canberra); Robert Breunig (Treasury, Government of Australia and Research School of Economics, Australian National University)
    Abstract: The purpose of this paper is to improve our understanding of the relationship between child care price and women's labour supply. We specify and estimate a discrete, structural model of the joint household decision over women’s labour supply and child care demand. Parents care about the well-being and development of their children and we capture this by including child care directly in household utility. Our model improves on previous papers in that we allow formal child care to be used for reasons other than freeing up time for mothers to work (such as child development) and we allow mothers’ work hours to exceed formal child care hours. As informal and paternal care are important features of the data, this second relaxation of previous hour constraints is particularly important. We estimate the model using data from 2005 to 2007 from the Household Income and Labour Dynamics in Australia (HILDA) Survey. We find that on average a one percent increase in the net price of child care leads to a decrease in hours of labour provided by partnered women of 0.10 per cent and a decrease in the employment rate of 0.06 per cent. These estimates are statistically significant. Furthermore, we find that labour supply responses are larger for women with lower wages, less education, and lower income.
    Keywords: Child care demand, child care price, women’s labour supply, elasticities, discrete choice model
    JEL: C15 C35 J22
    Date: 2012–11

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