nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2018‒04‒02
four papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. On Quantitative Spatial Economic Models By Kristian Behrens; Yasusada Murata
  2. Recovering Social Networks from Panel Data: Identification, Simulations and an Application By De Paula, Áureo; Rasul, Imran; Souza, Pedro
  3. Does the EU renewable energy sector still need a guarantees of origin market? By Jansen, Jaap
  4. Tax-Response Heterogeneity and the Effects of Double Taxation Treaties on the Location Choices of Multinational Firms By Simon Behrendt; Georg Wamser

  1. By: Kristian Behrens (National Research University Higher School of Economics); Yasusada Murata (National Research University Higher School of Economics)
    Abstract: Quantitative spatial economics (QSE) specifies various components such as preferences, production technology, and frictions for the movement of goods, people, and ideas. Despite the long literature on endogenous location decisions, the question of how these specifications affect resulting spatial equilibria has not been systematically explored. In this paper we start with workhorse models of QSE based on different specifications of preferences and show that spatial equilibria in those models can be generated using the conditional logit model by McFadden (1974). Our result suggests that existing models of QSE have a common origin in one of the oldest location choice models.
    Keywords: quantitative spatial economics; location choice; logit; spatial equilibrium
    JEL: F12 F14 R12 R13
    Date: 2018
  2. By: De Paula, Áureo; Rasul, Imran; Souza, Pedro
    Abstract: It is almost self-evident that social interactions can determine economic behavior and outcomes. Yet, information on social ties does not exist in most publicly available and widely used datasets. We present methods to recover information on the entire structure of social networks from observational panel data that contains no information on social ties between individuals. In the context of a canonical social interactions model, we provide sufficient conditions under which the social interactions matrix, endogenous and exogenous social effect parameters are all globally identified. We describe how high-dimensional estimation techniques can be used to estimate the model based on the Adaptive Elastic Net GMM method. We showcase our method in Monte Carlo simulations using two stylized and two real world network structures. Finally, we employ our method to study tax competition across US states. We find the identified network structure of tax competition differs markedly from the common assumption of tax competition between geographically neighboring states. We analyze the identified social interactions matrix to provide novel insights into the long-standing debate on the relative roles of factor mobility and yardstick competition in driving tax setting behavior across states. Most broadly, our method shows how the analysis of social interactions can be usefully extended to economic realms where no network data exists.
    Date: 2018–03
  3. By: Jansen, Jaap
    Abstract: The European Commission’s Renewable Energy Directive of 2001 mandated EU member states to develop a system for the guarantees of origin (GOs) of renewable electricity. In 2016, this market had an estimated value of €120 million per year across the EU, of which €100 million was income for generators of renewable electricity. Yet the GO system has been criticised for lacking environmental credibility and having little impact. The current legislation of the GO instrument leads to an oversupplied GO market and a double-counting problem. This enables suppliers who want to launch renewable electricity products, and corporations seeking to make their electricity demand more renewable, to do so in a legally correct and cheap but environmentally questionable way, which leads to little or no extra generation of renewable electricity. The author argues that well-designed reforms could address these weaknesses and provide additional, consumer-driven income streams to help realise new renewable energy projects in the future. He proposes a number of recommendations for action.
    Date: 2017–07
  4. By: Simon Behrendt; Georg Wamser
    Abstract: This paper examines location choices of multinational enterprises (MNEs). We particularly focus on the consequences of double taxation treaties (DTTs) and corporate profit taxes on the probability to choose a location. DTTs have become a key policy instrument used by countries to regulate international tax issues related to the cross-border activities of MNEs. Based on three alternative location choice models, which all allow parameter estimates to vary randomly across firms, we show that firm responses to policy variables are highly heterogeneous. Postestimation statistics suggest that the heterogeneity of parameters is strongly correlated with firm size and effective tax burden, which is consistent with tax-avoidance behavior and provides an explanation for why tax-responses are heterogeneous in the first place. We quantify the (positive) effect of DTTs and demonstrate that the negative tax-responsiveness becomes larger if a DTT is implemented. The latter is evidence that provisions intended to prevent tax avoidance are effective.
    Keywords: location choice, multinational firm, double taxation treaties, corporate income taxes
    JEL: F23 H25 H26
    Date: 2018

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