nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2013‒06‒16
four papers chosen by
Edoardo Marcucci
Universita' di Roma Tre

  1. The confounding effects of consumer heterogeneity on model-based inference of attribute non-attendance. By Hong il Yoo
  2. Euler Equations for the Estimation of Dynamic Discrete Choice Structural Models By Victor Aguirregabiria; Arvind Magesan
  3. A Stata module for estimating latent class conditional logit models via the Expectation-Maximization algorithm. By Daniele Pacifico; Hong il Yoo
  4. State dependence in Swedish social assistance By Andrén, Daniela; Andrén, Thomas

  1. By: Hong il Yoo (University of New South Wales)
    Abstract: Several empirical studies conclude that a majority of economic agents ignore some of observed product attributes when choosing among discrete alternatives. Many of these ndings are based on latent class logit with partially constrained support points wherein the share of each point is interpreted as the probability of ignoring particular attribute(s). We note that because the logit kernel is mixed over these points to approximate unmodeled interpersonal taste variation during the estimation stage, the interpretation of estimated shares is necessarily ambiguous. Using simulated examples, we explain why common forms of unobserved consumer heterogeneity can be confounded with attribute non-attendance.
    Keywords: attribute non-attendance, gmnl, latent class, consumer heterogeneity, mixed logit, information processing rule
    JEL: C25 C52 C81
    Date: 2012–11
  2. By: Victor Aguirregabiria; Arvind Magesan
    Abstract: We derive marginal conditions of optimality (i.e., Euler equations) for a general class of Dynamic Discrete Choice (DDC) structural models. These conditions can be used to estimate structural parameters in these models without having to solve for or approximate value functions. This result extends to discrete choice models the GMM-Euler equation approach proposed by Hansen and Singleton (1982) for the estimation of dynamic continuous decision models. We first show that DDC models can be represented as models of continuous choice where the decision variable is a vector of choice probabilities. We then prove that the marginal conditions of optimality and the envelope conditions required to construct Euler equations are also satisfied in DDC models. The GMM estimation of these Euler equations avoids the curse of dimensionality associated to the computation of value functions and the explicit integration over the space of state variables. We present an empirical application and compare estimates using the GMM-Euler equations method with those from maximum likelihood and two-step methods.
    Keywords: Dynamic discrete choice structural models; Euler equations; Choice probabilities.
    JEL: C13 C25 C51 C61
    Date: 2013–06–02
  3. By: Daniele Pacifico (Italian Department of the Treasury); Hong il Yoo (University of New South Wales)
    Abstract: This paper describes lclogit, a Stata module for estimating a discrete mixture or latent class logit model via the EM algorithm.
    Keywords: st0001, lclogit, latent class model, EM algorithm, mixed logit
    JEL: C35
    Date: 2012–11
  4. By: Andrén, Daniela (Örebro University School of Business); Andrén, Thomas (Swedish Confederation of Professional Associations (Saco) and IZA)
    Abstract: Although the economic integration of immigrants has been the subject of a large number of studies, the research on the effect of intermarriage on immigrants' economic integration/assimilation is scarce and has no equivalence in the literature on the receipt of social assistance. This study fills this gap in the literature by estimating the structural state dependence in social assistance in Sweden during 1990-1999 by different types of households, which were grouped by the country of birth of the sampled individual and his/her partner. Using a dynamic discrete choice model that controls for unobserved heterogeneity and the initial conditions problem, we find that state dependence in Swedish social assistance was relatively strong during 1990-1999, and differed extensively across different household types. Although Swedish-born partners who separated are one of the groups with the lowest receipt of social assistance (i.e., 1.08-1.76%), these individuals exhibit the highest state dependence (24.4 percentage points). Foreign-born singles have almost the same value for the state dependence, but these individuals also have the highest receipt of social assistance (18.47%). Surprisingly, the group with the lowest receipt of social assistance (0.27-3.06%) and the lowest state dependence (4.7 percentage points) are the foreign-born women living together with a Swedish-born man.
    Keywords: social assistance; state dependence; unobserved heterogeneity; initial conditions; dynamic probit model; GHK simulator
    JEL: I30 I38 J18
    Date: 2013–05–31

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