nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2017‒11‒19
four papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. The Impact of In-Work Benefits on Female Labor Supply and Income Distribution in Spain By Ayala, Luis; Paniagua, Milagros
  2. Informal sector heterogeneity and income inequality: Evidence from the Democratic Republic of Congo By Franck M. Adoho; Djeneba Doumbia
  3. Economic Policy Uncertainty and Insurance By Mehmet Balcilar; Rangan Gupta; Chien-Chiang Lee; Godwin Olasehinde-Williams
  4. Travel mode and tour complexity: The roles of fuel price and built environment By Simora, Michael; Vance, Colin

  1. By: Ayala, Luis; Paniagua, Milagros
    Abstract: In-work benefits (IWBs) have become very common transfer programs that seek to meet both efficiency and equity targets. An expanding literature has assessed the effects of these policies on income distribution and labor supply showing important implications for female labor participation. In this paper, we estimate the distributional and behavioral impacts of a simulated IWB in Spain based on the replacement of the existing working mother tax credit (WMTC) using as a reference the US Earned Income Tax Credit (EITC). We simulate the effects of the proposed scheme using EUROMOD and a discrete choice model of labor supply. Our results show that the enhancement of the proposed IWB would have significant and positive effects both in terms of female labor participation and inequality and poverty reduction. The introduction of this IWB would generate a substantial increase in labor participation at the extensive margin and a non-negligible reduction at the intensive margin.
    Date: 2017–10–30
  2. By: Franck M. Adoho (World Bank, USA); Djeneba Doumbia (Paris School of Economics, France and World Bank, USA)
    Abstract: This paper uses 1-2-3 survey data on the Democratic Republic of Congo to analyze heterogeneity in the informal sector. It empirically identifies three types of entrepreneurs in the sector. The first group of entrepreneurs—top performers—is growth oriented and enjoys greater access to capital. The second group—constrained gazelles—includes entrepreneurs who share many characteristics, especially management skills, with the top performers, but operate with less capital. The third group—survivalists—comprises firms struggling to grow. Based on logit and fixed effect ordinary least squares models, the results show that poverty and income inequality are more common among constrained gazelles and survivalists. The paper also shows that income inequality is explained mainly by educational disparities and lack of credit access among entrepreneurs. Additionally, the outcomes of a Blinder-Oaxaca decomposition show that the performance of firms is a key factor in explaining differences in income. Examining the drivers of performance, the paper finds that human capital and managerial skills are important engines of performance.
    Keywords: Informal sector, income inequality, firm performance, Democratic Republic of Congo.
    JEL: D21
    Date: 2017–10
  3. By: Mehmet Balcilar (Department of Economics, Eastern Mediterranean University, Famagusta, Northern Cyprus, Turkey, Department of Economics, University of Pretoria, Pretoria, South Africa and Montpellier business School, Montpellier, France); Rangan Gupta (University of Pretoria, Pretoria, South Africa); Chien-Chiang Lee (Department of Finance, National Sun Yat-sen University, Kaohsiung, Taiwan); Godwin Olasehinde-Williams (Department of Economics, Eastern Mediterranean University, Famagusta, Northern Cyprus, Turkey)
    Abstract: Just as the world has witnessed the increased importance of the insurance sector over the past few decades, it has also witnessed a sharp rise in risks and uncertainties. Surprisingly, studies analyzing the relationship between economic policy uncertainty and the insurance sector are almost non-existent. Also, a major limitation of insurance literature is the choice of methodology. Most studies about the insurance sector do not take into consideration issues of heterogeneity and cross-sectional dependence, and are therefore subject to errors. To address the identified gaps, this study investigates the impact of economic policy uncertainty on insurance premium growth, controlling for the effect of real output, in a panel of 19 countries over the period 2003-2016 by employing heterogeneous panel estimation techniques with cross-sectional dependence. CADF and CIPS unit root tests conducted show that each of the variables becomes stationary after first difference. The Westerlund (2007) cointegration test results confirm that a long-run relationship exists between the variables. Findings from the error correction based panel estimations show that the insurance sector is not immune to the effects of economic policy uncertainty and real output. Economic policy uncertainty raises insurance premiums in the short run and lessens it in the long run whereas real output increases insurance premiums both in the short and long run, although its long run impact is greater than the short run impact. Also, economic policy uncertainty exerts a bigger influence on non-life insurance premium than on life insurance premium.
    Keywords: Economic policy uncertainty, insurance premium, short- and long-run relationships
    JEL: C33 G22
    Date: 2017–11
  4. By: Simora, Michael; Vance, Colin
    Abstract: Despite steady increases in fuel economy, CO2 emissions from road transportation in Germany are on the rise, increasing by nearly 4% since 2009. This study analyzes the impact of different policy levers for bucking this trend, focusing specifically on the role of fuel prices and features of the built environment. We estimate two multinomial logit models, one addressing work-related tours and the other non-work related tours. Both models consider two interrelated dimensions of travel on the extensive margin: mode choice and tour complexity. We use the model estimates to predict outcome probabilities for different levels of our policy variables. Our results suggest significant effects of the built environment – measured by bike path density, urbanization, and proximity to public transit – in discouraging car use and increasing tour complexity. Fuel prices, by contrast, appear to have little bearing on these choices.
    Keywords: activity-based approach,travel mode choice,tour complexity,multinomial logit,predicted probabilities
    JEL: D10 R48 R42
    Date: 2017

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