nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2018‒12‒24
seven papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. An Information-Theoretic Approach to Estimating Willingness To Pay for River Recreation Site Attributes By Henry, Miguel; Mittelhammer, Ron; Loomis, John
  2. Measuring Long-Run Price Elasticities in Urban Travel Demand By Donna, Javier D.
  3. Looking beyond the farm and household: Determinants of on-farm diversification in India By Varun Kumar Das
  4. Estimating Family Preferences for Elder-care Services: A conjoint-survey experiment in Japan By KANEKO Shinji; KAWATA Keisuke; YIN Ting
  5. WAGE ADJUSTMENT POLICIES IN RUSSIAN FIRMS By Ksenia V. Rozhkova; Sergey Yu. Roshchin; Sergey A. Solntsev
  6. What is a Good School, and Can Parents Tell? Evidence on the Multidimensionality of School Output By Diether Beuermann; C. Kirabo Jackson; Laia Navarro-Sola; Francisco Pardo
  7. On the estimation of behavioral macroeconomic models via simulated maximum likelihood By Kukacka, Jiri; Jang, Tae-Seok; Sacht, Stephen

  1. By: Henry, Miguel; Mittelhammer, Ron; Loomis, John
    Abstract: This study applies an information theoretic econometric approach in the form of a new maximum likelihood-minimum power divergence (ML-MPD) semi-parametric binary response estimator to analyze dichotomous contingent valuation data. The ML-MPD method estimates the underlying behavioral decision process leading to a person’s willingness to pay for river recreation site attributes. Empirical choice probabilities, willingness to pay measures for recreation site attributes, and marginal effects of changes in some explanatory variables are estimated. For comparison purposes, a Logit model is also implemented. A Wald test of the symmetric logistic distribution underlying the Logit model is rejected at the 0.01 level in favor of the ML-MPD distribution model. Moreover, based on several goodness-of-fit measures we find that the ML-MPD is superior to the Logit model. Our results also demonstrate the potential for substantially overstating the precision of the estimates and associated inferences when the imposition of unknown structural information is not accounted explicitly for in the model. The ML-MPD model provides more intuitively reasonable and defensible results regarding the valuation of river recreation than the Logit model.
    Keywords: Minimum power divergence, contingent valuation, binary response models, information theoretic econometrics, river recreation
    JEL: C14 C5 Q5
    Date: 2018–01
  2. By: Donna, Javier D.
    Abstract: This paper develops a structural model of urban travel to estimate long-run price elasticities. A dynamic discrete choice demand model with switching costs is estimated, using a panel dataset with public market-level data on automobile and public transit use for Chicago. The estimated model shows that long-run own- (automobile) and cross- (transit) price elasticities are more elastic than short-run elasticities, and that elasticity estimates from static and myopic models are downward biased. The estimated model is used to evaluate the response to a gasoline tax. Static and myopic models mismeasure long-run substitution patterns, and could lead to incorrect policy decisions.
    Keywords: Long-run price elasticities, Dynamic demand travel, Hysteresis
    JEL: L71 L91 L98
    Date: 2018–11–05
  3. By: Varun Kumar Das (Indira Gandhi Institute of Development Research)
    Abstract: This paper analyses the factors affecting on-farm diversification decision. Notwithstanding the influence of farm and household conditions, studies have also highlighted the role of external pull factors on farm diversification. Though appraised in scholarship, this aspect has eluded an empirical scrutiny in literature. Taking India as a case, this study shows that apart from farm and household factors, there is a broader agro-ecological and structural feature which impacts on-farm diversification decision. Correcting for endogeneity in a seemingly unrelated system of ordered probit models, a "three-stage" residual inclusion model is estimated. The findings show that proximity to social infrastructure such as schools, colleges, and access to public transport matters for diversification. Results also show that though urbanization may increase demand for variety of products, it might as well impinge upon farm labor supply as non-farm opportunities also rises with urbanization. Thus, the underlying structure of the local economy also merits attention while understanding on-farm diversification process.
    Keywords: Farm diversification; Pull factors; External conditions; Residual inclusion; Economies of density; Agro-ecology; Urbanization; Structural transformation
    JEL: Q12 Q18 R23 R53
    Date: 2018–11
  4. By: KANEKO Shinji; KAWATA Keisuke; YIN Ting
    Abstract: The paper provides a preference evaluation for elderly-care services, based on a conjoint survey and a rational-choice framework. For the empirical section, we conducted a conjoint survey with Japanese respondents to estimate preferences of elderly-care services. Our findings show that room sharing is the most important for both demand and consumer surplus, and it is justified to assist households in using elderly-care facilities at a middle distance with additional health-care services.
    Date: 2018–12
  5. By: Ksenia V. Rozhkova (National Research University Higher School of Economics); Sergey Yu. Roshchin (National Research University Higher School of Economics); Sergey A. Solntsev (National Research University Higher School of Economics)
    Abstract: Wage adjustments for employees are a reaction mechanism to changing market conditions and form a significant part of pay policy. Though various attempts to explore wage levels and wage differentials have been made, wage adjustment policies remain an understudied topic. This paper analyses the determinants of wage adjustments based on data from Russian enterprises 2015–17. The analysis is based on detailed data from an employer survey which covers more than 5,000 firms in both the public and private sector. The study adopts probit models to identify the reasons which determine wage revisions, depending on internal employer characteristics and external labour market conditions. The results are in line with previous research on the topic (Bayo-Moriones et al., 2016) and suggest that both internal and external factors influence wage adjustments. A wage adjustment is a reflection of the ability to pay meaning that revisions are often made by successful firms with high employee turnover. Institutional frameworks, especially trade union activity, affects the firm’s decision to adjust wages despite the general opinion on the insignificance of unions in Russia. This study contributes to the limited literature by analysing the determinants of wage policies depending on the firm’s characteristics. This is the first study of its kind based on extensive Russian data.
    Keywords: Russia, wage adjustment, pay policy, pay settlement, trade union
    JEL: D22 J01 J31 J33 J51
    Date: 2018
  6. By: Diether Beuermann; C. Kirabo Jackson; Laia Navarro-Sola; Francisco Pardo
    Abstract: Is a school’s impact on high-stakes test scores a good measure of its overall impact on students? Do parents value school impacts on high-stakes tests, longer-run outcomes, or both? To answer the first question, we apply quasi-experimental methods to data from Trinidad and Tobago and estimate the causal impacts of individual schools on several outcomes. Schools' impacts on high-stakes tests are weakly related to impacts on low-stakes tests, dropout, crime, teen motherhood, and formal labor market participation. To answer the second question, we link estimated school impacts to parents’ ranked lists of schools and employ discrete choice models to estimate parental preferences. Parents value schools that causally improve high-stakes test scores conditional on average outcomes, proximity, and peer quality. Consistent with parents valuing the multidimensional output of schools, parents of high-achieving girls prefer schools that increase formal labor market participation, and parents of high-achieving boys prefer schools that reduce crime.
    JEL: I2 J01 J38
    Date: 2018–12
  7. By: Kukacka, Jiri; Jang, Tae-Seok; Sacht, Stephen
    Abstract: In this paper, we introduce the simulated maximum likelihood method for identifying behavioral heuristics of heterogeneous agents in the baseline three-equation New Keynesian model. The method is extended to multivariate macroeconomic optimization problems, and the estimation pro-cedure is applied to empirical data sets. This approach considerably relaxes restrictive theoretical assumptions and enables a novel estimation of the intensity of choice parameter in discrete choice. In Monte Carlo simulations, we analyze the properties and behavior of the estimation method, which provides important information on the behavioral parameters of the New Keynesian model. However, the curse of dimensionality arises via a consistent downward bias for idiosyncratic shocks. Our empirical results show that the forward-looking version of both the behavioral and the rational model specifications exhibits good performance. We identify potential sources of misspecification for the hybrid version. A novel feature of our analysis is that we pin down the switching parameter for the intensity of choice for the Euro Area and US economy.
    Keywords: Behavioral Heuristics,Intensity of Choice,Monte Carlo Simulations,New-Keynesian Model,Simulated Maximum Likelihood
    JEL: C53 D83 E12 E32
    Date: 2018

This nep-dcm issue is ©2018 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.