nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2014‒08‒09
three papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Structural Labor Supply Models and Wage Exogeneity By Max Löffler; Andreas Peichl; Sebastian Siegloch
  2. Too Proud to Stop: Regret in Dynamic Decisions By Paul Viefers; Philipp Strack
  3. Why Do Homogeneous Firms Export Differently ? A Density Externality Approach of Trade By Vincent Boitier; Antoine Vatan

  1. By: Max Löffler; Andreas Peichl; Sebastian Siegloch
    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
  2. By: Paul Viefers; Philipp Strack
    Abstract: Many economic situations involve the timing of irreversible decisions. E.g. People decide when to sell a stock or stop searching for a better price. We analyze the behavior of a decision maker who evaluates his choice relative to the ex-post optimal choice in an optimal stopping task. We derive the optimal strategy under such regret preferences, and show how it is different from that of an expected utility maximizer. We also show that if the decision maker never commits mistakes the behavior resulting from this strategy is observationally equivalent to that of an expected utility maximizer. We then test our theoretical predictions in the laboratory. The results from a structural discrete choice model we fit to our data provide strong evidence that many people's stopping behavior is largely determined by the anticipation of and aversion to regret.
    Keywords: Optimal stopping, Dynamic behavior, Regret
    JEL: D3 C91
    Date: 2014
  3. By: Vincent Boitier (Université paris 1 Panthéon Sorbonne et PSE); Antoine Vatan (CREST)
    Abstract: While the reason why the average exporting firm has a higher productivity than a purely domestic firm is now well understood, the theoretical literature has remained silent on why firms do not enter foreign markets according to an exact hierarchy, as predicted by models à la Mélitz. To this aim, this paper proposes a new model of export choice in which the interactions between firms are characterized by density externalities. This type of interaction is closely related to a Mean Field Game. After showing that such an interaction is included in standard monopolistic competition, in the short run, we show how homogeneous firms can export differently. Moreover in this model, it remains true that more productive firms export on average to less attractive countries. Thence, our model displays a non-exact hierarchy of trade, as the findings of Eaton et al. (2011) suggest
    Keywords: Export Choice, Dispersion in Strategies, Density Externalities, Trade Externalities, Sequential Exporting
    JEL: F1
    Date: 2014–02

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