nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2015‒11‒01
six papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Nonparametric identification of endogenous and heterogeneous aggregate demand models: complements, bundles and the market level By Fabian Dunker; Stefan Hoderlein; Hiroaki Kaido
  2. Ageing by feet? Regional migration, neighbourhood choice and local demographic change in German cities By Uwe Neumann
  3. Characterizations of identified sets delivered by structural econometric models By Andrew Chesher; Adam Rosen
  4. Use and non-use values in an applied bioeconomic model of fisheries and habitat connections By Claire W. Armstrong; Viktoria Kahui; Godwin K. Vondolia; Margrethe Aanesen; Mikołaj Czajkowski
  5. Revealed Preferences and Spatial Segregation By Henri Busson
  6. Euclidean distance versus travel time in business location: A probabilistic mixture of hurdle-Poisson models By Sabina Buczkowska; Nicolas Coulombel; Matthieu de Lapparent

  1. By: Fabian Dunker (Institute for Fiscal Studies); Stefan Hoderlein (Institute for Fiscal Studies and Boston College); Hiroaki Kaido (Institute for Fiscal Studies and Boston University)
    Abstract: This paper studies nonparametric identification in market level demand models for differentiated products. We generalize common models by allowing for the distribution of heterogeneity parameters (random coefficients) to have a nonparametric distribution across the population and give conditions under which the density of the random coefficients is identified. We show that key identifying restrictions are provided by (i) a set of moment conditions generated by instrumental variables together with an inversion of aggregate demand in unobserved product characteristics; and (ii) an integral transform (Radon transform) that maps the random coefficient density to the aggregate demand. This feature is shown to be common across a wide class of models, and we illustrate this by studying leading demand models. Our examples include demand models based on the multinomial choice (Berry, Levinsohn, Pakes, 1995), the choice of bundles of goods that can be substitutes or complements, and the choice of goods consumed in multiple units.
    Date: 2015–09
  2. By: Uwe Neumann
    Abstract: In the literature on the economics of demographic change so far the regional and neighbourhood-level consequences were out of the main focus. Yet, regional migration accentuates diversity in the progress of ageing. In fact, while households are known to ?vote with their feet? when they choose a residential location, neighbourhood populations may experience ?ageing by feet? as an outcome of a multitude of individual location decisions. This paper examines at what pace demographic change proceeds at the neighbourhood level in an ageing region and to what extent regional migration and neighbourhood choice during the past two decades reinforced or changed patterns of residential segregation among urban neighbourhoods. German cities differ from those in many other highly developed countries in that their population has stagnated or even begun to decline during the past decades. Apart from Eastern Germany, due to decades of net migration to more prosperous regions, the old-industrialised Ruhr in North Rhine-Westphalia is one of the German regions, which have already been affected by a severe loss in population and fundamental population change over the past decades. Drawing on municipal data at the sub-city level and microdata from a representative survey, this paper examines how change in the composition of neighbourhood populations relates to regional migration. The first step of the analysis focuses on the pace of neighbourhood-level demographic change during the period from 1998 to 2008. The second step examines household preferences relating to residential locations in the Ruhr, based on microdata from a representative survey carried out in 2010. The identification strategy is adopted from the recent literature on the microeconomics of discrete choice. In the Ruhr region, over the past decades out-migration and demographic ageing coincided with changes in intra-regional migration. After several decades of suburbanisation, in the 1990s net migration to suburban municipalities came to a halt. The micro-level analysis finds that among household preference apparently the desire for centrality took over from preference of low-density surroundings, which had dominated for decades. Within urban areas, migration now concentrates more on selected neighbourhoods in close vicinity to the city centres. In other neighbourhoods, due to low fertility and a comparatively low influx of young inhabitants, the average age has begun to increase. It is a specific characteristic of the Ruhr, which is an amalgam of neighbouring cities, to be less densely populated than other large urban agglomerations in Germany. Lower overall density here combines with a comparatively less pronounced agglomeration of working-age adults in central areas. As a whole, local demographic change implies new challenges for urban policy in many neighbourhoods, both in those not providing the characteristics favoured by most mobile households and in those with a high influx.
    Keywords: demographic change; neighbourhood choice; regional migration; segregation
    JEL: C21 C25 O18 R23
    Date: 2015–10
  3. By: Andrew Chesher (Institute for Fiscal Studies and University College London); Adam Rosen (Institute for Fiscal Studies and cemmap and UCL)
    Abstract: This paper develops characterizations of identified sets of structures and structural features for complete and incomplete models involving continuous and/or discrete variables. Multiple values of unobserved variables can be associated with particular combinations of observed variables. This can arise when there are multiple sources of heterogeneity, censored or discrete endogenous variables, or inequality restrictions on functions of observed and unobserved variables. The models generalize the class of incomplete instrumental variable (IV) models in which unobserved variables are single-valued functions of observed variables. Thus the models are referred to as Generalized IV (GIV) models, but there are important cases in which instrumental variable restrictions play no significant role. The paper provides the first formal definition of observational equivalence for incomplete models. The development uses results from random set theory which guarantee that the characterizations deliver sharp bounds, thereby dispensing with the need for case-by-case proofs of sharpness. One innovation is the use of random sets defined on the space of unobserved variables. This allows identification analysis under mean and quantile independence restrictions on the distributions of unobserved variables conditional on exogenous variables as well as under a full independence restriction. It leads to a novel general characterization of identified sets of structural functions when the sole restriction on the distribution of unobserved and observed exogenous variables is that they are independently distributed. Illustrations are presented for a parametric random coefficients linear model and for a model with an interval censored outcome, in both cases with endogenous explanatory variables, and for an incomplete nonparametric model of English auctions. Numerous other applications are indicated.
    Keywords: Instrumental variables; endogeneity; excess heterogeneity; limited information; set identification; partial identification; random sets; incomplete models
    JEL: C10 C14 C24 C26
    Date: 2015–10
  4. By: Claire W. Armstrong (University of Tromsø; The Arctic University of Norway); Viktoria Kahui (University of Otago); Godwin K. Vondolia (University of Tromsø; The Arctic University of Norway); Margrethe Aanesen (University of Tromsø; The Arctic University of Norway); Mikołaj Czajkowski (Faculty of Economic Sciences, University of Warsaw)
    Abstract: In addition to indirect support to fisheries, marine habitats also provide non-use benefits that are overlooked in most existing bioeconomic models. Our paper expands a dynamic bioeconomic fisheries model in which the presence of natural habitats not only reduces the cost of fishing, via aggregation effects, but also supplies non-use benefits. The theoretical model is illustrated with the analysis of cold water corals in Norway where two fishing methods are considered – destructive bottom trawl and non-destructive coastal gear. Non-use values of cold water corals in Norway are estimated using a discrete choice experiment. Both the theoretical model and its empirical applications show how non-use values impact upon the optimal fishing practices.
    Keywords: renewable, non-renewable, habitat, fishery, bioeconomic, use and non-use value
    JEL: Q22 Q32 Q51
    Date: 2015
  5. By: Henri Busson
    Abstract: The relationship income / distance to CBD is basically nonlinear and its form varies a lot across the world. We often consider classic forms such as the typical US city one, where rich people live in the suburbs and the European city where they live downtown. Nevertheless, more complex patterns could be observed like in New York City. In this city, the area which is the closest to the city center is very rich; poor people live further away from CBD and the middle class lives in the suburbs. To explain these stylized facts, we use a model inspired by Turnbull (1997). Instead of employing the classical utility functions, this model applies the revealed preference theory. In his original paper, Turnbull established several propositions that made his model consistent with the main results obtained in urban economics (for instance that the prices decrease in relation to the distance from the CBD). Despite its consistence, the model gives different predictions than the main studies regarding the relationship between income and distance to CBD. This model allows us to deal with a great heterogeneity among the households (regarding incomes, tastes, transportation modes, amenities consumption) and thus enables many different potential equilibria. This diversity of equilibria permits to represent in a more accurate way cities and patterns and thus justifies the use of this model. Moreover, we try to take into account every parameter that could influence location choice in a single framework. Some model focuses on access to public transportation (Glaeser et al. (2008), other on amenities (Brueckner et al. (1999)). But no model has ever succeeded in giving a complete framework for studying the income sorting. Utility functions are usually used because the revealed preferences method is highly complex. But our model is quite simple because we demonstrated that the GARP axiom used in the revealed preference theory is equivalent to a simple equation. In our paper, several differences are found when comparing our results to the classic method using utility functions. Firstly, the ratio commuting costs per mile over demand land for rent is found constant between income groups, which is consistent with Wheaton (1977). As this variable is no longer supposed to explain the income sorting, the model focuses on other variables to explain it: income elasticity of housing demand, commuting time or amenity consumption. Moreover, in our model, some of the richer households will locate closer from CBD than a poorer one while other rich households will locate further away. This leads to an overlapping of the different income groups unlike the utility functions models that often predict complete segregation (except in De Bartolome and Ross (2003)).
    Keywords: income sorting; revealed preferences; segregation;
    JEL: R20 D01 D11
    Date: 2015–10
  6. By: Sabina Buczkowska; Nicolas Coulombel; Matthieu de Lapparent
    Abstract: While the question of the specification of spatial weight matrix is now largely discussed in the spatial econometrics literature, the definition of distance has attracted less attention. The choice of the distance measure is often glossed over, with the ultimate use of the Euclidean distance. This paper investigates this issue in the case of establishments locating in the Paris region. Indeed, numerous works highlight the importance of transport infrastructure in the location model, which challenges the choice of the Euclidean distance in representing spatial effects. To compare the various distance measures, we develop a probabilistic mixture of hurdle-Poisson models for several activity sectors. Each model class uses a different definition of distance to capture spatial spillovers. The following distance measures are considered: Euclidean distance, two road distances (with and without congestion), public transit distance, and the corresponding travel times. Data were drawn primarily from the Census survey of establishments carried by the French National Institute of Statistics and Economic Studies. Data on the stock of establishments are given for the 1st of January 2007. In our sample, 763 131 pre-existing establishments were registered on the market. The number of newly created establishments in 2007 equals to 87 974. Based on the performed analyses we drew four main conclusions. 1) Overall, the obtained results are in line with the literature regarding the main determinants of establishment location. 2) Based on the Bayesian Information Criteria, we found that the proposed mixture of hurdle-Poisson models that uses two latent classes performs significantly better than the ?pure? hurdle-Poisson models based on a single distance measure, emphasizing the usefulness of our approach. By using the mixture hurdle-Poisson model we considerably decreased the level of BIC up to 42%. 3) From the overall level of estimated probabilities, we observed that for some transport-oriented sectors, such as construction, the peak road travel time is the most likely to correctly capture spatial spillovers. For other sectors, which do not rely so heavily on the transport infrastructure and which search the proximity to the potential client or user, such as real estate, the Euclidean distance tends to perform well to account for the linkage between neighboring areas. This tends to show that spatial spillovers are channeled by different means depending on the activity sector. 4) In addition, by allowing different distance measures to coexist within a hurdle-Poisson mixture model, the hurdle part of the model that uses the appropriate distance matrix significantly improves.
    Keywords: location choice; mixture hurdle-Poisson model; spatial spillovers; distance
    JEL: C31 C35 L22 R41
    Date: 2015–10

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