nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2015‒07‒18
four papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Heterogeneous preferences and the effects of incentives in promoting conservation agriculture in Malawi: By Ward, Patrick S.; Bell, Andrew R.; Parkhurst, Gregory M.; Droppelmann, Klaus; Mapemba, Lawrence
  2. Demand for complementary financial and technological tools for managing drought risk: By Ward, Patrick S.; Spielman, David J.; Ortega, David L.; Kumar, Neha; Minocha, Sumedha
  3. Modeling Endogenous Mobility in Wage Determiniation By John M. Abowd; Kevin McKinney; Ian M. Schmutte
  4. When Experienced and Decision Utility Concur: The Case of Income Comparisons By Clark, Andrew E.; Senik, Claudia; Yamada, Katsunori

  1. By: Ward, Patrick S.; Bell, Andrew R.; Parkhurst, Gregory M.; Droppelmann, Klaus; Mapemba, Lawrence
    Abstract: Malawi faces significant challenges in meeting its future food security needs because there is little scope for increasing production by simply expanding the area under cultivation. One potential alternative for sustainably intensifying agricultural production is by means of conservation agriculture (CA), which improves soil quality through a suite of farming practices that reduce soil disturbance, increase soil cover via retained crop residues, and increase crop diversification. We use discrete choice experiments to study farmers’ preferences for these different CA practices and assess willingness to adopt CA. Our results indicate that, despite many benefits, some farmers are not willing to adopt CA without receiving subsidies, and current farm-level practices significantly influence willingness to adopt the full CA package. Providing subsidies, however, can create perverse incentives. Subsidies may increase the adoption of intercropping and residue mulching, but adoption of these practices may crowd out adoption of zero tillage, leading to partial compliance. Further, exposure to various risks such as flooding and insect infestations often constrains adoption. Rather than designing subsidies or voucher programs to increase CA adoption, it may be important to tailor insurance policies to address the new risks brought about by CA adoption.
    Keywords: zero tillage, food security, food production, sustainability, technology adoption, subsidies, discrete choice experiments, conservation agriculture,
    Date: 2015
  2. By: Ward, Patrick S.; Spielman, David J.; Ortega, David L.; Kumar, Neha; Minocha, Sumedha
    Abstract: Weather-related production risks remain one of the most serious constraints to agricultural production in much of the developing world. Financial and technological innovations that mitigate these risks have the potential to greatly benefit farmers in areas prone to such risks. In this study we examine farmers’ preferences for two distinct tools that allow them to manage drought risk: weather index insurance and a recently released drought-tolerant rice variety. We illustrate how these tools can independently address drought risk and demonstrate the potential for these tools to be combined in a complementary risk management product. Using a discrete choice experiment, we assess farmers’ preferences for these two tools independently and in a bundled package. Findings indicate that farmers are generally unwilling to pay for drought-tolerant rice independent of insurance, largely due to the yield penalty under normal conditions. When bundled with insurance, however, farmers’ valuation of the rice increases. Farmers value insurance on its own, but even more so when bundled with the drought-tolerant rice variety. The results provide evidence that farmers value the complementarities inherent in a well-calibrated bundle of risk management tools.
    Keywords: Insurance, Risk, finance, rice, Drought tolerance, Risk management, Weather, Farmers, discrete choice experiments,
    Date: 2015
  3. By: John M. Abowd; Kevin McKinney; Ian M. Schmutte
    Abstract: We evaluate the bias from endogenous job mobility in fixed-effects estimates of worker- and firm-specific earnings heterogeneity using longitudinally linked employer-employee data from the LEHD infrastructure file system of the U.S. Census Bureau. First, we propose two new residual diagnostic tests of the assumption that mobility is exogenous to unmodeled determinants of earnings. Both tests reject exogenous mobility. We relax the exogenous mobility assumptions by modeling the evolution of the matched data as an evolving bipartite graph using a Bayesian latent class framework. Our results suggest that endogenous mobility biases estimated firm effects toward zero. To assess validity, we match our estimates of the wage components to out-of-sample estimates of revenue per worker. The corrected estimates attribute much more of the variation in revenue per worker to variation in match quality and worker quality than the uncorrected estimates.
    Keywords: Earnings heterogeneity, Mobility Bias, Latent Class Model, Markov Chain Monte Carlo
    Date: 2015–06
  4. By: Clark, Andrew E. (Paris School of Economics); Senik, Claudia (Paris School of Economics); Yamada, Katsunori (Kindai University)
    Abstract: While there is now something of a consensus in the literature on the economics of happiness that income comparisons to others help determine subjective wellbeing, debate continues over the relative importance of own and reference-group income, in particular in research on the Easterlin paradox. The variety of results in this domain have produced some scepticism regarding happiness analysis, and in particular with respect to the measurement of reference-group income. We here use data from an original Internet survey in Japan to compare the results from happiness regressions to those from hypothetical-choice experiments. The trade-off between own and others' income (showing the importance of absolute and relative income) is similar in these two sets of results. This kind of validation of experienced utility via direct comparison with decision utility remains rare in this literature.
    Keywords: satisfaction, income comparisons, reference-group income, discrete-choice experiments
    JEL: D31 D63 I3 J31
    Date: 2015–07

This nep-dcm issue is ©2015 by Edoardo Marcucci. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.