nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2016‒10‒09
six papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Understanding the distribution of economic benefits from improving coastal and marine ecosystems By Kristine Pakalniete; Juris Aigars; Mikolaj Czajkowski; Solvita Strake; Ewa Zawojska; Nick Hanley
  2. A Comparison of Stated Preference Methods for the Valuation of Improvement in Road Safety By Naghmeh Niroomand; Glenn P. Jenkins
  3. Effects of Parental Leave Policies on Female Career and Fertility Choices By Shintaro Yamaguchi
  4. The Heterogeneous Effects of Eco-labels on Internalities and Externalities By Sahoo, Anshuman; Sawe, Nik
  5. Measuring the Impact of Improved Traceability Information in Seafood Markets Following a Large Scale Contamination Event By William L. Huth; O. Ashton Morgan; John C. Whitehead
  6. Germany’s Energiewende: A Tale of Increasing Costs and Decreasing Willingness-To-Pay By Andor, Mark A.; Frondel, Manuel; Vance, Colin

  1. By: Kristine Pakalniete (AKTiiVS Ltd., Latvia); Juris Aigars (Latvian Institute of Aquatic Ecology, Latvia); Mikolaj Czajkowski (University of Warsaw, Department of Economics, Poland); Solvita Strake (Latvian Institute of Aquatic Ecology, Latvia); Ewa Zawojska (University of Warsaw, Department of Economics, Poland); Nick Hanley (Department of Geography and Sustainable Development, University of St. Andrews)
    Abstract: The ecological status of coastal and marine waterbodies world-wide is threatened by multiple stressors, including nutrient inputs from various sources and increasing occurrences of invasive alien species. These stressors impact the environmental quality of the Baltic Sea. Each Baltic Sea country contributes to the stressors and, at the same time, is affected by their negative impacts on water quality. Understanding who benefits from improvements in coastal and marine waters is key to assessing public support for policies aimed at achieving such changes. We propose a new approach to account for variability in benefits related to differences in socio-demographics of respondents, by using a structural model of discrete choice. Our method (1) provides a convenient way of incorporating a wide range of socio-demographics as explanatory variables in conditional multinomial logit models without the risk of collinearity, and (2) is more statistically efficient than the alternative, typically used approaches. The new technique is applied in a study which examines the preferences of Latvian citizens towards improvements of the coastal and marine environment quality that could help the Baltic Sea waters of Latvia reach Good Environmental Status as required by the European Union's Marine Strategy Framework Directive. Applying the discrete choice experiment method, we find that overall, Latvians are willing to pay for reducing losses of biodiversity, for improving water quality for recreation by reduced eutrophication, and for reducing new occurrences of invasive alien species. A significant group within the sample seems not to value environmental improvements in the Baltic Sea, and, thus,is unwilling to support costly measures for achieving such improvements. The structural model of discrete choice reveals substantial heterogeneity among Latvians towards changes in the quality of coastal and marine waters of Latvia.
    Keywords: good environmental status, coastal and marine water quality, biodiversity, invasive alien species, eutrophication, discrete choice experiment, observed preference heterogeneity, socio-demographic characteristics, hybrid choice model
    JEL: Q51 Q25 Q57 Q58
    Date: 2016–09
  2. By: Naghmeh Niroomand (Department of Economics, Eastern Mediterranean University, North Cyprus); Glenn P. Jenkins (Queen's University, Canada and Eastern Mediterranean University, North Cyprus)
    Abstract: This paper presents an empirical comparison of the contingent valuation method (CVM) and choice experiment (CE) method in the estimation of the non-market value of road safety improvements. In this study we used both the CVM and the CE method to identify the preferences and tradeoffs of automobile drivers in North Cyprus for road safety improvements. Mixed logit and payment ladder approaches were used to assess the driversÕ willingness to pay (WTP) for road safety improvements. Although the CVM yielded higher values than the CE, the differences between the estimates of WTP derived from these two methods were found to be statistically insignificant. The value of a statistical life (VSL) and the value of an injury (VI) were estimated for car accidents, and the value was found for the annual economic welfare loss from such deaths and injuries in North Cyprus. The point estimate of the value of a statistical life (VSL) expressed in euros is Û717,000, with the 95% confidence interval from Û315,293 to Û1,117,856, and the value of an injury (VI) is Û16,885, with the 95% confidence interval from Û5,603 to Û28,186. The point estimate of the VSL for North Cyprus obtained from this study was below Û1Êmillion, which places it among the bottom 30% of the estimates made internationally for these parameters. When aggregated over the whole country for 2014, the total annual economic welfare burden was Û46.7 million, which is equivalent to a economic welfare loss of 1.5% of the gross national product (GNP) of North Cyprus in that year.
    Keywords: Willingness to pay; contingent value model; choice experiment; road safety; car drivers
    JEL: R41 G13 C35
    Date: 2016–10
  3. By: Shintaro Yamaguchi
    Abstract: This paper constructs and estimates a dynamic discrete choice structural model of female employment and fertility decisions that incorporates job protection and cash benefits of parental leave legislation. The estimated structural model is used for ex ante evaluation of policy reforms that change the duration of job protection and/or the arrangement for cash benefits. Counterfactual simulations indicate that introducing an initial one-year job protection policy increases maternal employment significantly, but extending the existing job protection period from one to three years has little effect. The employment effects of cash benefits also seem modest. Overall, parental leave policies have little effect on fertility.
    Keywords: parental leave, female labor supply, discrete choice model, structural estimation
    JEL: J13 J22 J24
    Date: 2016–10
  4. By: Sahoo, Anshuman (Steyer-Taylor Center for Energy Policy and Finance, Stanford University); Sawe, Nik (Stanford University)
    Abstract: The Energy Star program labels energy efficient goods and has been credited with reducing the external costs of energy consumption. Its social value is nonetheless ambiguous if, in its absence, consumers both over-value and under-value the energy consumption attribute of goods, relative to their economic preferences. The label must perform opposite tasks to guarantee an increase in consumer welfare: it must prompt some individuals to increase their valuation of the energy consumption attribute and others, to decrease it. Otherwise, the program could yield "negative dividends" by inducing losses in individual-level welfare that outweigh externality reductions. We develop a method to quantify the impact of the program on individual-level decision-making behavior and welfare. Using novel data from a stated choice experiment involving light bulbs, we illustrate the potential for negative dividends and that the value of programs such as the Energy Star depends on the choice set available to consumers.
    JEL: D12 H23 Q48
    Date: 2015–03
  5. By: William L. Huth; O. Ashton Morgan; John C. Whitehead
    Abstract: We fuse and jointly estimate revealed and stated preference data over the BP Deepwater Horizon oil spill time horizon to analyze the potential for a new seafood traceability system to mitigate long-run decreases in product demand following a major contamination event. Findings indicate that traceability information flows that provide more precise information to oyster consumers regarding the location of harvest ameliorate consumers’ perceived risk of eating oyster meals after the spill, leading to a significant increase in demand. Further, the magnitude of the increase is greater than the negative long-term post-spill effects, leading to overall welfare gains. However, any price increase associated with the information will mitigate the initial welfare gains. Overall, our findings suggest that the potential success of a new seafood traceability system depends on the implementation costs and the extent to which price increases are passed onto consumers. Key Words: Traceability, oyster consumers, consumer surplus, contamination event, risk preferences
    Date: 2016
  6. By: Andor, Mark A.; Frondel, Manuel; Vance, Colin
    Abstract: This paper presents evidence that the accumulating cost of Germany's ambitious plan to transform its system of energy provision - the so-called Energiewende - is butting up against consumers' willingness-to-pay (WTP) for it. Following a descriptive presentation that traces the German promotion of renewable energy technologies since 2000, we draw on two stated-preference surveys conducted in 2013 and 2015 that elicit the households' WTP for green electricity. Two models are estimated, one based on a closed-ended question framed around Germany's target of 35% renewable energy in electricity provision by 2020, and the other on an open-ended format that captures changes in WTP over time. To deal with the bias that typifies hypothetical responses, both models distinguish respondents according to whether they express definite certainty in their reported WTP. The results from both models reveal a strong contrast between the households' general acceptance of supporting renewable energy technologies and their own WTP for green electricity.
    Abstract: Dieser Artikel vergleicht die wachsenden Kosten für die Energiewende mit der Zahlungsbereitschaft deutscher Haushalte für grünen Strom. Basierend auf zwei Erhebungen aus den Jahren 2013 und 2015 werden zwei Modelle geschätzt, die einerseits auf einer offenen Frage zur Zahlungsbereitschaft für die Erreichung des 35%-Ziels für das Jahr 2020 basieren und andererseits auf einer Frage mit fest vorgegebenen Werten für die Zahlungsbereitschaft. Unsere Ergebnisse zeigen einen starken Kontrast zwischen der generellen Befürwortung der Förderung erneuerbarer Energien und der Zahlungsbereitschaft für grünen Strom.
    Keywords: certainty approach,energy policy,willingness-to-pay
    JEL: D12 Q21 Q41
    Date: 2016

This nep-dcm issue is ©2016 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.