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on Discrete Choice Models |
| By: | David Laibson; Andrea Repetto; Jeremy Tobacman |
| Abstract: | Intertemporal preferences are difficult to measure. We estimate time preferences using a structural buffer stock consumption model and the Method of Simulated Moments. The model includes stochastic labor income, liquidity constraints, child and adult dependents, liquid and illiquid assets, revolving credit, retirement, and discount functions that allow short-run and long-run discount rates to differ. Data on retirement wealth accumulation, credit card borrowing, and consumption-income comovement identify the model. Our benchmark estimates imply a 40% short-term annualized discount rate and a 4.3% long-term annualized discount rate. Almost all specifications reject the restriction to a constant discount rate. Our quantitative results are sensitive to assumptions about the return on illiquid assets and the coefficient of relative risk aversion. When we jointly estimate the coefficient of relative risk aversion and the discount function, the short-term discount rate is 15% and the long-term discount rate is 3.8%. |
| Keywords: | Intertemporal Consumer Choice, Lifecycle Models and Saving, Consumption, Saving |
| JEL: | D91 E21 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:341&r=dcm |
| By: | Seung-Hyun Hong (University of Illinois); Leonardo Rezende (University of Illinois); |
| Abstract: | This paper attempts to distinguish state dependence (or lock-in) from unobserved preferences in the decision to adopt Linux or Windows as the operating system for computer servers. To this end, we use detailed survey data of over 100,000 establishments in the United States. Without accounting for unobserved heterogeneity in establishment-specific preferences for operating systems, we find a strong positive correlation between the current choice and the previous choice, suggesting potentially high switching costs and lock-in. To account for unobserved preferences for either operating system, we impose weak identifying assumptions and employ recently developed dynamic discrete choice panel data methods (Arellano and Carrasco 2003). The results show little or no evidence of state dependence, implying that unobserved preferences, rather than switching costs and lock-in, are more important factors in the adoption decision. Once taste heterogeneity is taken into account, we additionally find little evidence of network effects between server operating systems and non-server operating systems. |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:0705&r=dcm |
| By: | Andrew M. Jones; Stefanie Schurer |
| Abstract: | Individual heterogeneity plays a key role in explaining variation in self-reported well-being and, in particular, health satisfaction. It is hypothesised that the influence of this heterogeneity varies over levels of health and increases over the life-cycle. These hypotheses are tested with data on health satisfaction from 22 waves of the German Socioeconomic Panel (GSOEP).Nonlinear fixed effects methods that allow for unobserved heterogeneity are not readily available for categorical measures of well-being. One common solution is to revert to conditional fixed effects methods, at the price of a high degree of information loss. Another common solution is to ignore the association between unobserved heterogeneity and socio-economic status by using pooled or random effects models, at the price of potential bias.We use a generalization of the conditional fixed effects logit, that allows for individual-specific reporting bias, heterogeneity in health endowments, and heterogeneity in the impact of income on health satisfaction. Adjusting for unobserved heterogeneity accounts for the relationship between income and very good health, but not between income and poorer health states. The income gradient for older age-groups is more strongly affected by controlling for unobserved heterogeneity: revealing an increasing influence of heterogeneity on health satisfaction over the life-span. |
| Keywords: | Panel data, generalized conditional fixed effects logit, generalized ordered logit, health, GSOEP |
| JEL: | I12 C23 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0008&r=dcm |
| By: | Torge Middendorf |
| Abstract: | Recent studies emphasize the impact of macroeconomic factors on educational attainment. They show that although individual factors like the educational level of one’s parents play a decisive role in determining the human capital accumulation of the children, the cohort size as well as the local labor market seem to have a significant impact, too. This paper analyzes the impact of birth cohort size as well as unemployment on educational attainment in Europe using the European Community Household Panel. Estimation results suggest that neither the size of the birth cohort nor the local unemployment rate induces a change in the individual’s schooling decision. |
| Keywords: | Educational attainment,demography, multivariate ordered probit |
| JEL: | I21 J21 J62 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0010&r=dcm |