nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2014‒07‒13
fifteen papers chosen by
Edoardo Marcucci
Universita' di Roma Tre

  1. Bayesian D-Optimal Choice Designs for Mixtures By Aiste Ruseckaite; Peter Goos; Dennis Fok
  2. Social norms, morals and self-interest as determinants of pro-environment behaviour By Mikołaj Czajkowski; Nick Hanley; Karine Nyborg
  3. Family ties: occupational responses to cope with a household income shock By Massimo Baldini; Costanza Torricelli; Maria Cesira Urzì Brancati
  4. Cultural Heritage and the Attractiveness of Cities: Evidence from Recreation Trips By Ruben van Loon; Tom Gosens; Jan Rouwendal
  5. Intensive labour supply: a menu choice revealed preference approach for German females and males By Beckmann, Klaus; Franz, Nele; Schneider, Andrea
  6. A New Formulation for Latent Class Models By Brown, Sarah; Greene, William H.; Harris, Mark N.
  7. How Individual Preferences are Aggregated in Groups: An Experimental Study By Attila Ambrus; Ben Greiner; Parag A. Pathak
  8. A New Perspective on Classical Choice Problems Using Selection Functions By Hedges, Jules; Oliva, Paulo; Winschel, Evguenia; Winschel, Viktor; Zahn, Philipp
  9. Spatial interactions in location decisions: Empirical evidence from a Bayesian spatial probit model By Adriana Nikolic; Christoph Weiss
  10. Fighting Lone Mothers’ Poverty through In-Work Benefits Methodological Issues and Policy Suggestions By Pronzato, Chiara Daniela
  11. Cultural Diversity and Cultural Distance as Choice Determinants of Migration Destination By Zhiling Wang; Thomas de Graaff; and Peter Nijkamp
  12. Welfare Effects of Distortionary Tax Incentives under Preference Heterogeneity: An Application to Employer-provided Electric Cars By Alexandros Dimitropoulos; Jos N. van Ommeren; Paul Koster; and Piet Rietveld†
  13. Child Work and Schooling in Pakistan— To What Extent Poverty and Other Demographic and Parental Background Matter? By Madeeha Gohar Qureshi; Saman Nazir; Hafsa Hina
  14. Structural labor supply models and wage exogeneity By Löffler, Max; Peichl, Andreas; Siegloch, Sebastian
  15. Labor donation or money donation? Pro-sociality on prevention of natural disasters in a case of cyclone AILA, Bangladesh By Shibly Shahrier; Koji Kotani

  1. By: Aiste Ruseckaite (Erasmus University Rotterdam); Peter Goos (Universiteit Antwerpen, Belgium); Dennis Fok (Erasmus University Rotterdam)
    Abstract: Consumer products and services can often be described as mixtures of ingredients. Examples are the mixture of ingredients in a cocktail and the mixture of different components of waiting time (e.g., in-vehicle and out-of-vehicle travel time) in a transportation setting. Choice experiments may help to determine how the respondents' choice of a product or service is affected by the combination of ingredients. In such studies, individuals are confronted with sets of hypothetical products or services and they are asked to choose the most preferred product or service from each set. However, there are no studies on the optimal design of choice experiments involving mixtures. We propose a method for generating an optimal design for such choice experiments. To this end, we first introduce mixture models in the choice context and next present an algorithm to construct optimal experimental designs, assuming the multinomial logit model is used to analyze the choice data. To overcome the problem that the optimal designs depend on the unknown parameter values, we adopt a Bayesian D-optimal design approach. We also consider locally D-optimal designs and compare the performance of the resulting designs to those produced by a utility-neutral (UN) approach in which designs are based on the assumption that individuals are indifferent between all choice alternatives. We demonstrate that our designs are quite different and in general perform better than the UN designs.
    Keywords: Bayesian design, Choice experiments, D-optimality, Experimental design, Mixture coordinate-exchange algorithm, Mixture experiment, Multinomial logit model, Optimal design
    JEL: C01 C10 C25 C61 C83 C90 C99
    Date: 2014–05–09
  2. By: Mikołaj Czajkowski (Faculty of Economic Sciences, University of Warsaw); Nick Hanley (School of Geography and Sustainable Development, University of St Andrews); Karine Nyborg (Department of Economics, University of Oslo)
    Abstract: This paper considers the role which selfish, moral and social incentives and pressures play in explaining the extent to which stated choices over pro-environment behaviours vary across individuals. The empirical context is choices over household waste contracts and recycling actions in Poland. A theoretical model is used to show how cost-based motives and the desire for a positive self- and social image combine to determine the utility from alternative choices of recycling behaviour. We then describe a discrete choice experiment designed to empirically investigate the effects such drivers have on stated choices. Using a latent class model, we distinguish three types of individual who are described as duty-orientated recyclers, budget recyclers and homo oeconomicus. These groups vary in their preferences for how frequently waste is collected, and the number of categories into which household waste must be recycled. Our results have implications for the design of future policies aimed at improving participation in recycling schemes.
    Keywords: recycling, motives of pro-environment behaviour, social norms, discrete choice experiment
    JEL: Q51 Q53 D01 D03
    Date: 2014
  3. By: Massimo Baldini; Costanza Torricelli; Maria Cesira Urzì Brancati
    Abstract: In this paper we analyse household members’ reactions in case of unforeseen negative income shocks due to a transition into unemployment and/or into income support. More specifically, we estimate the impact of an income loss suffered by one household member on the probability that another household member – not necessarily the wife - transit from out of the labour force into employment or into workforce. Since in a lifecycle setting the labour supply of secondary workers is also affected by credit constraints, we take into account financial wealth and liabilities as well as a measure of household illiquidity due to housing. To perform our analyses, we use a discrete choice model and data drawn from the Bank of Italy Survey on Household Income and Wealth (SHIW) over the period 2004-2012, so as to include the effects of the Great Recession. Even after accounting for standard socio-economic controls, results show significant reactions to income shocks, especially during the recession. As for portfolio controls, we find a significant difference (mostly in terms of intercept, but also of slope) between the level of illiquidity and labour market participation for households hit/not hit by a shock.
    Keywords: household labour decisions; household portfolios; discrete-choice models
    JEL: D12 D14 J22 C25
    Date: 2014–04
  4. By: Ruben van Loon (VU University Amsterdam); Tom Gosens (VU University Amsterdam); Jan Rouwendal (VU University Amsterdam)
    Abstract: Many cities are trying to attract tourists by investing in urban amenities. Cultural heritage is an important example and substantial investments are needed to keep ancient inner cities and characteristic monumental buildings in good shape. The costs of these policies are usually clear, the benefits are often much more difficult to assess. This paper attempts to fill part of this gap by studying the destination choices of urban recreation trips that have urban recreation as the main travel motive. We estimate a discrete choice model for destination choice that takes into account the potential importance of unobserved characteristics. The model allows us to compute the marginal willingness to travel for destinations offering more cultural heritage, which we measure as the area of the inner city that has a protected status because of the cultural heritage that is present there.
    Keywords: Cultural heritage, recreation, city marketing
    JEL: C31 D12 R12 R22 L83
    Date: 2014–04–28
  5. By: Beckmann, Klaus (Helmut Schmidt University, Hamburg); Franz, Nele (Carinthian School of Applied Sciences); Schneider, Andrea (University of Münster)
    Abstract: This paper deals with discrete labour supply decisions of different groups of persons in response to a change in net wage rates. The centrepiece of this approach is individuals' switching between working time categories, while facing switching costs that arise when people expand or reduce working hours. We define a degree of persistence of individual behaviour as well as its complement, labour supply mobility. Using the German Socio-Economic Panel (SOEP), we estimate persistence and mobility by gender and type of household.
    Keywords: labour mobility; discrete choice approach; labour supply elasticity
    JEL: C25 H31 J22
    Date: 2014–06–30
  6. By: Brown, Sarah (University of Sheffield); Greene, William H. (New York University); Harris, Mark N. (Curtin University)
    Abstract: Latent class, or finite mixture, modelling has proved a very popular, and relatively easy, way of introducing much-needed heterogeneity into empirical models right across the social sciences. The technique involves (probabilistically) splitting the population into a finite number of (relatively homogeneous) classes, or types. Within each of these, typically, the same statistical model applies, although these are characterised by differing parameters of that distribution. In this way, the same explanatory variables can have differing effects across the classes, for example. A priori, nothing is known about the behaviours within each class; but ex post, researchers invariably label the classes according to expected values, however defined, within each class. Here we propose a simple, yet effective, way of parameterising both the class probabilities and the statistical representation of behaviours within each class, that simultaneously preserves the ranking of such according to class-specific expected values and which yields a parsimonious representation of the class probabilities.
    Keywords: latent class models, finite mixture models, ordered probability models, expected values, body mass index
    JEL: C3 D1 I1
    Date: 2014–06
  7. By: Attila Ambrus (Department of Economics, Duke University); Ben Greiner (School of Economics, Australian School of Business, the University of New South Wales); Parag A. Pathak (Department of Economics, MIT)
    Abstract: This paper experimentally investigates how individual preferences, through unrestricted deliberation, are aggregated into a group decision in two contexts: reciprocating gifts and choosing between lotteries. In both contexts, we find that median group members have a significant impact on the group decision, but the median is not the only influential group member. Non-median members closer to the median tend to have more influence than other members. By investigating the same individual’s influence in different groups, we find evidence for relative position in the group having a direct effect on influence. These results are consistent with predictions from a spatial model of dynamic bargaining determining group choices. We also find that group deliberation involves bargaining and compromise as well as persuasion: preferences tend to shift towards the choice of the individual’s previous group, especially for those with extreme individual preferences.
    Keywords: group decision-making, role of deliberation, social influence
    JEL: C72 C92 H41
    Date: 2014–06
  8. By: Hedges, Jules; Oliva, Paulo; Winschel, Evguenia; Winschel, Viktor; Zahn, Philipp
    Abstract: We use quantifiers and selection functions to generalize the classical economic approach to choice. Our framework encompasses preference and utility based approaches as special cases, but also extends to non-maximizing behavior and context-dependent motives such as social concerns. We adapt the method of quantifiers and selection functions which is based on higher-order functions and originate in computer science.
    Keywords: behavioral economics , social preferences , beauty contest , higher order functions , quantifiers , selection functions
    JEL: C0 D01 D03 D63 D64
    Date: 2014
  9. By: Adriana Nikolic (Department of Economics, Vienna University of Economics and Business); Christoph Weiss (Department of Economics, Vienna University of Economics and Business)
    Abstract: In the past few decades spatial econometric models have become a standard tool in empirical research. Nevertheless applications in binary-choice models remain scarce. This paper makes use of Bayesian Spatial Probit Models to model and estimate spatial interactions in location decisions. For this purpose, we focus on the Austrian retail gasoline market, which is going through a process of remarkable structural changes. A short analysis shows that, during the last decade 10.9% of the stations had left the market and a percentage of 29.6% had either left the market or had changed the brand. This paper aims at investigating this process. A special characteristic of this market is the local competition structure which is characterized by spatial dependencies along local competitors. To capture these spatial dependencies and since the dependent variable is binary in nature (an exit had taken place or not), we apply a Bayesian spatial probit model using MCMC estimation on station level data for the whole Austrian retail gasoline market. Our results suggest, that the decision to leave the market, does not only depend on own characteristics, but also on competitors. In particular, we find the exit decisions to exhibit a negative spatial correlation. Moreover, our model allows to quantify spatial spillover effects of this market.
    Keywords: Bayesian Spatial Probit Model, Exit, Gasoline retailing, Spatial competition
    JEL: L13 L81 C21
    Date: 2014–07
  10. By: Pronzato, Chiara Daniela (University of Turin)
    Abstract: Lone mothers are overrepresented among the poor in many European countries, with detrimental consequences for them and their children. Even in Norway, which is known for its successful economic and welfare development, lone mothers were at least three times more likely to be poor than married mothers. To redress this issue, the Norwegian government instituted welfare reform in 1998, increasing lone - parent benefit levels and introducing working requirements. Using a quasi-experimental model, Mogstad and ronzato(2008) found that the reform had a positive effect on lone mothers’ labor supply and slightly reduced poverty. Yet given the extent of public resources invested, was this the most that policy makers could expect in terms of reducing poverty? To answer this question, I estimate a discrete choice model of work and welfare participation decisions, and use the behavioral estimates to derive the policy parameters that would have minimized poverty among lone mothers. To produce more robust results, a prerequisite for developing policy recommendations, the discrete choice model is validated by comparing its predictions with the estimated effects of the reform obtained from a quasi-experiment (Mogstad and Pronzato, 2008).
    Date: 2014–06
  11. By: Zhiling Wang; Thomas de Graaff; and Peter Nijkamp (VU University Amsterdam)
    Abstract: This study analyses the impact of cultural composition on regional attractiveness from the perspective of migrant sorting behaviour. We use an attitudinal survey to quantify cultural distances between natives and immigrants in the area concerned, and estimate the migrants’ varying preferences for both cultural diversity and cultural distance. To account for regional unobserved heterogeneity, our econometric analysis employs artificial instrumental variables, as developed by Bayer et al. (2004). The main conclusions are twofold. On the one hand, cultural diversity increases regional attractiveness. On the other hand, average cultural distance greatly weakens regional attractiveness, even when the presence of network effect is controlled for.
    Keywords: migration, cultural diversity, cultural distance, destination choice, sorting
    JEL: R2 Z1
    Date: 2014–06–02
  12. By: Alexandros Dimitropoulos; Jos N. van Ommeren; Paul Koster; and Piet Rietveld† (VU University Amsterdam)
    Abstract: This paper presents an approach for the estimation of welfare effects of tax policy changes under heterogeneity in consumer preferences. The approach is applied to evaluate the welfare effects of current tax advantages for electric vehicles supplied as fringe benefits by employers. Drawing on stated preferences of Dutch company car drivers, we assess the short-run welfare effects of changes in the taxation of the private use of these vehicles. We find that the welfare gain of a marginal increase in the taxation of electric company cars is substantial and even outweighs the marginal tax revenue raised.
    Keywords: Social welfare, Latent class, Stated preference, Company car, Electric vehicle, Plug-in hybrid
    JEL: D12 H23 H24 H31 O33 Q58 R41
    Date: 2014–06–02
  13. By: Madeeha Gohar Qureshi (Pakistan Institute of Development Economics, Islamabad); Saman Nazir (Pakistan Institute of Development Economics, Islamabad); Hafsa Hina (Pakistan Institute of Development Economics, Islamabad)
    Abstract: Keeping into consideration the far-reaching social and economic impact of child work both for the children involved and society as a whole, in this study an attempt has been made to disentangle the child employment and schooling tradeoff with perspective to understand the effect of income deprivation measures and other non-income factors such as demographic and parental background information for Pakistan using Pakistan Panel Household Survey 2010 data set. At one level this research resolves empirically the debate that exist in literature whether child work is direct outcome of poverty or not in context of Pakistan through assessing the impact of the poverty channel for both likelihood of sending a child for paid work versus probability of enrolling a child into school and on other tries to connect the above line of reasoning with other non-income channels so as to build more enriching perspective. The consequences of household socioeconomic level in terms of its poor or non-poor status on child employment and child enrollment likelihood functions is assessed using both a direct measure of poverty based on household consumption expenditure information and also indirect measures based on access (or lack of it to be more specific) of household to electricity, sewerage system and to type of housing in terms of number of rooms and durability of house. In our empirical evidence, we do find strong support for poverty channel both directly and indirectly acting as defining force in decreasing his or her probability for school enrollment. However in context of effect of poverty on probability of child employment we do not find strong evidence through direct measure of poverty based on household consumption information, however the indirect proxies of poverty level of the household as child belonging to poor status in terms of access to certain type of living [living in house with no electricity, kaccha type of house (not bricked and hence vulnerable to fall), no sewerage system and with just one room] do provide strong evidence in support of poverty channel of impact on increasing the chances of child work. Further demographic information whether it is in form of increasing sibling size or impact of number of adult earners or parental background variables such as employment status of parents and their employment categories provides support for the significance of how being resource poor can be a binding constraint for the household and can act as an impetus to send a child towards paid work against schooling.
    Keywords: Child Employment, Child Schooling, Discrete Regression and Qualitative Choice Models
    JEL: C24 C25 I21 J13 J16
    Date: 2014
  14. By: Löffler, Max; Peichl, Andreas; Siegloch, Sebastian
    Abstract: There is still considerable dispute about the magnitude of labor supply elasticities. While differences in micro and macro estimates are recently attributed to frictions and adjustment costs, we show that relatively low labor supply elasticities derived from microeconometric models can also be explained by modeling assumptions with respect to wages. Specifically, we estimate 3,456 structural labor supply models each representing a plausible combination of frequently made choices. While most model assumptions do not systematically affect labor supply elasticities, our analysis shows that the results are very sensitive to the treatment of wages. In particular, the often-made but highly restrictive independence assumption between preferences and wages is key. To overcome this restriction, we propose a flexible estimation strategy that nests commonly used models. We show that loosening the exogeneity assumption leads to labor supply elasticities that are much higher. --
    Keywords: labor supply,elasticity,random utility models,wages
    JEL: C25 C52 H31 J22
    Date: 2014
  15. By: Shibly Shahrier (International University of University); Koji Kotani (International University of University)
    Abstract: The coastal zone in Bangladesh is the most powerfully lethal due to cyclones and storm hazard where 29% of the total population reside. Thus, collective disaster mitigation measures are urgent, and it is important to understand people's pro-social attitude toward such countermeasures. However, few studies on this issue have been conducted in the context of developing countries, such as Bangladesh, and we therefore address this issue. We made a questionnaire survey of 1,000 respondents and elicited (i) a willingness to donate their labor (WDL) and (ii) a willingness to pay (WTP) to collective countermeasures for avoiding the damages from cyclones and associated disasters. With this data, we examine WDL and WTP in relation to respondents' occupation, education and income. The novelty lies in offering respondents an option of choosing WDL and/or WTP in the questionnaire. The study finds that the poor and less educated people are likely to choose WDL and willing to donate more labor, while rich and educated people are likely to choose WTP and willing to donate more money. However, we also find that voluntary labor donation from poor and less educated people is significant in that overall donation from poor and less educated people exceeds that from rich and educated people. Overall, poor and less educated people may be more pro-social and WDL is an important source of contribution to be utilized in natural disaster mitigation of developing countries. This finding can be considered a useful guidance for future policies in more general cases, since it is consistent with observed labor donations for the recovery in the 2011 earthquake off the Pacific coast of Tohoku, Japan.
    Keywords: Pro-sociality, natural disaster, preventive measures, willingness to pay, willingness to donate labor
    Date: 2014–06

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