nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2013‒12‒06
five papers chosen by
Edoardo Marcucci
Universita' di Roma Tre

  1. Intra-household discrete choice models of mode choice and residential location By Nathalie Picard; André De Palma; Sophie Dantan
  2. In-work benefits for married couples: an ex-ante evaluation of EITC and WTC policies in Italy By Giuseppe De Luca; Claudio Rossetti; Daniela Vuri
  3. Probabilistic extention of the cumulative prospect theory By Ilya Zutler
  4. Bayesian estimation of a discrete response model with double rules of sample selection By Rong Zhang; Brett A. Inder; Xibin Zhang
  5. Outward FDI from the Central and Eastern European Transition Economies – A Discrete Choice Analysis of Location Choice within the European Union By Cantner, Uwe; Günther, Jutta; Hassan, Sohaib Shahzad; Jindra, Björn

  1. By: Nathalie Picard (THEMA - Théorie économique, modélisation et applications - CNRS : UMR8184 - Université de Cergy Pontoise); André De Palma (ENS Cachan - Ecole Normale Supérieure de Cachan - École normale supérieure [ENS] - Cachan); Sophie Dantan (THEMA - Théorie économique, modélisation et applications - CNRS : UMR8184 - Université de Cergy Pontoise)
    Abstract: We review the literature on household decision-making in economics as well as in transportation and urban economics. This literature starts with Gary Becker in Economics, 30 years ago, and has recently been introduced to study specific questions related to space. We consider two examples: residential location and mode choice for dual earner households. In these two examples, the decision is the outcome of a bargaining process within the household. We show that the results may differ substantially when compared with those of the standard approach.
    Date: 2013–11–26
  2. By: Giuseppe De Luca; Claudio Rossetti; Daniela Vuri
    Abstract: This paper investigates labor supply and redistributive effects of in-work benefits for Italian married couples using a tax-benefit microsimulation model and a multi-sectoral discrete choice model of labor supply. We consider in-work benefits based on the Earned Income Tax Credit (EITC) and the Working Tax Credit (WTC) existing in the US and the UK, respectively. The standard design of these income support mechanisms is however augmented with a premium for two-earner households to avoid potential disincentive effects on secondary earners. Revenue neutral policy simulations show that our reforms may greatly improve the current Italian tax-benefit system in terms of both incentive and redistributive effects. Furthermore, neglecting sector-specific attributes of the various job opportunities may lead to an oversimplified representation of the choice set that does not allow to capture some labor market transitions and thus results in attenuated labor supply responses.
    Keywords: In-work benefits, sectoral labor supply, poverty, microsimulation, married couples
    JEL: I38 H31 H53
    Date: 2013–11
  3. By: Ilya Zutler (National Research University Higher School of Economics. Faculty of Economics, Department of Higher Mathematics, Docent, PhD)
    Abstract: A number of experiments indicate probabilistic preferences in cases where no one alternative is absolutely optimal. The task of predicting the choice of one of the alternatives among multiple alternatives is then practically important and not trivial. It can occur in situations of choice under risk when no one lottery stochastically dominates others. For risky lotteries there are several complicated models of probabilistic binary preference. For the first time, we herein propose the probabilistic extension of the cumulative prospect theory (CPT). The presented visual graphic justification of this model is intuitively clear and does not use sophisticated cumulative summing or a Choquet integral. Here we propose a model of selecting from a set of alternatives by continuous Markov random walks. It makes predicting the results of a choice easy because it fully uses dates received by probabilistic extension of ÑPT. The proposed methods are quite simple and do not require a large amount of data for practical use
    Keywords: cumulative prospect theory, probabilistic choice, continues Markov process.
    JEL: D81 D83 C44
    Date: 2013
  4. By: Rong Zhang; Brett A. Inder; Xibin Zhang
    Abstract: We present a Bayesian sampling algorithm for parameter estimation in a discrete-response model, where the dependent variables contain two layers of binary choices and one ordered response. Our investigation is motivated by an empirical study using such a double-selection rule for three labour-market outcomes, namely labour-force participation, employment and occupational skill level. It is of particular interest to measure the marginal effects of some mental health factors on these labour-market outcomes. The contribution of our investigation is to present a sampling algorithm, which is a hybrid of Gibbs and Metropolis-Hastings algorithms. In Monte Carlo simulations, numerical maximization of likelihood fails to converge for more than half of the simulated samples. Our Bayesian method represents a substantial improvement: it converges in every sample, and performs with similar or better precision than maximum likelihood. We apply our sampling algorithm to the double-selection model of labour-force participation, employment and occupational skill level, where marginal effects of explanatory variables, in particular the mental health factors, on the three labour-force outcomes are assessed through 95% Bayesian credible intervals. The proposed sampling algorithm can easily be modified for other multivariate nonlinear models that involve selectivity and are difficult to estimate by other means.
    Keywords: Gibbs sampler, Marginal effects, Mental illness, Metropolis-Hastings algorithm, Ordered outcome.
    Date: 2013
  5. By: Cantner, Uwe; Günther, Jutta; Hassan, Sohaib Shahzad; Jindra, Björn
    Abstract: The location determinants of outward foreign direct investment (OFDI) have received extensive attention in contemporary literature, largely from the perspective of advanced economies. Less attention has been focused on OFDI from emerging economies. This applies, in particular, to Central and East European Countries (CEEC). Apart from traditional OFDI motives such as market-seeking, there is a growing debate regarding the relevance of knowledge-seeking as an investment motive for firms from catch-up economies. We apply a conditional-logit approach to assess OFDI location factors at the host country level for a sample of 1,036 firms from 10 CEEC that entered the EU between 1995 and 2010. We find that firms from CEEC primarily target economies characterized by high growth rates and geographic proximity, i.e., often other transition economies within the EU. The impact of market size increases significantly after EU accession, when more firms are located in advanced economies (EU15 countries). In terms of knowledge-seeking, we find that firms from CEEC seem to be primarily attracted by human capital endowment rather than by the R&D intensity of other EU economies.
    Keywords: Outward FDI, Conditional-logit, Location Choice, Transition Economies, Knowledge Seeking, CEEC
    JEL: F23
    Date: 2013–01–18

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