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on Discrete Choice Models |
| By: | Greene, William H.; Gillman, Max; Harris, Mark N.; Spencer, Christopher |
| Abstract: | We propose a Tempered Ordered Probit (TOP) model. Our contribution lies not only in explicitly accounting for an excessive number of observations in a given choice category - as is the case in the standard literature on inflated models; rather, we introduce a new econometric model which nests the recently developed Middle Inflated Ordered Probit (MIOP) models of Bagozzi and Mukherjee (2012) and Brooks, Harris, and Spencer (2012) as a special case, and further, can be used as a specification test of the MIOP, where the implicit test is described as being one of symmetry versus asymmetry. In our application, which exploits a panel data-set containing the votes of Bank of England Monetary Policy Committee (MPC) members, we show that the TOP model affords the econometrician considerable flexibility with respect to modeling the impact of different forms of uncertainty on interest rate decisions. Our findings, we argue, reveal MPC members. asymmetric attitudes towards uncertainty and the changeability of interest rates. |
| Keywords: | Monetary policy committee, voting, discrete data, uncertainty, tempered equations |
| JEL: | C3 E50 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hitcei:2013-04&r=dcm |
| By: | Igor Kheifets (New Economic School, Moscow); Carlos Velasco (Dept. of Economics, Universidad Carlos III de Madrid) |
| Abstract: | This paper proposes new specification tests for conditional models with discrete responses. In particular, we can test the static and dynamic ordered choice model specifications, which is key to apply efficient maximum likelihood methods, to obtain consistent estimates of partial effects and to get appropriate predictions of the probability of future events. The traditional approach is based on probability integral transforms of a jittered discrete data which leads to continuous uniform iid series under the true conditional distribution. We investigate in this paper an alternative transformation based only on original discrete data. We show analytically and in simulations that our approach dominates the traditional approach in terms of power. We apply the new tests to models of the monetary policy conducted by the Federal Reserve. |
| Keywords: | Specification tests, Count data, Dynamic discrete choice models, Conditional probability integral transform |
| JEL: | C12 C22 C52 |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1924&r=dcm |
| By: | Bargain, Olivier; Peichl, Andreas |
| Abstract: | Previous reviews of static labor supply estimations concentrate mainly on the evidence from the 1980s and 1990s, Anglo-Saxon countries and early generations of labor supply modeling. This paper provides a fresh characterization of steady-state labor supply elasticities for Western Europe and the US. We also investigate the relative contribution of different methodological choices in explaining the large variation in elasticity size observed across studies. While some recent studies show that genuine preference heterogeneity across countries explains only a modest share of this variation (Bargain et al., 2013), we focus here on time changes and estimation methods as key contributors of the differences across studies. Both factors can explain larger elasticities in older studies (i.e. an increase in female labor market attachment over time and a switch from the Hausman estimation approach to discrete-choice models with tax-benefit simulations). Meta-analysis evidence suggests that smaller elasticities in the recent period may be due to the time factor, i.e. a likely change in work preferences, both in the US and in Europe. -- |
| Keywords: | household labor supply,elasticity,taxation,Europe,US |
| JEL: | C25 C52 H31 J22 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:13084&r=dcm |
| By: | Fabian Dunker (University of Goettingen); Stefan Hoderlein (Boston College); Hiroaki Kaido (Brown University) |
| Abstract: | Individual players in a simultaneous equation binary choice model act differently in different environments in ways that are frequently not captured by observables and a simple additive random error. This paper proposes a random coefficient specification to capture this type of heterogeneity in behavior, and discusses nonparametric identification and estimation of the distribution of random coefficients. We establish nonparametric point identification of the joint distribution of all random coefficients, except those on the interaction effects, provided the players behave competitively in all markets. Moreover, we establish set identification of the density of the coefficients on the interaction effects, and provide additional conditions that allow to point identify this density. Since our identification strategy is constructive throughout, it allows to construct sample counterpart estimators. We analyze their asymptotic behavior, and illustrate their finite sample behavior in a numerical study. Finally, we discuss several extensions, like the semiparametric case, or correlated random coefficients. |
| Keywords: | Games, Heterogeneity, Nonparametric Identification, Random Coefficients, Inverse Problems |
| Date: | 2013–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:boc:bocoec:835&r=dcm |
| By: | Aaberge, Rolf (Research Department at Statistics Norway and ESOP, University of Oslo); Flood, Lennart (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | An essential difference between the design of the Swedish and the US in-work tax credit systems relates to their functional forms. Where the US earned income tax credit (EITC) is phased out and favours low and medium earnings, the Swedish system is not phased out and offers 17 and 7 per cent tax credit for low and medium low incomes and a lump-sum tax deduction equal to approximately 2300 USD for medium and higher incomes. The purpose of this paper is to evaluate the efficiency and distributional effects of these two alternative tax credit designs. We pay particular attention to labour market exclusion; i.e. individuals within as well as outside the labour force are included in the analysis. To highlight the importance of the joint effects from the tax and the benefit systems it appears particular relevant to analyse the labour supply behaviour of single mothers. To this end, we estimate a structural random utility model of labour supply and welfare participation. The model accounts for heterogeneity in consumption-leisure preferences as well as for heterogeneity and constraints in job opportunities. The results of the evaluation show that the Swedish system without phase-out generates substantial larger labour supply responses than the US version of the tax credit. Due to increased labour supply and decline in welfare participation we find that the Swedish reform is self-financing for single mothers, whereas a 10 per cent deficit follows from the adapted EITC version used in this study. However, where income inequality rises modestly under the Swedish tax credit system, the US version with phase-out leads to a significant reduction in the income inequality. |
| Keywords: | labour supply; single mothers; in-work tax credit; social assistance; random utility model |
| JEL: | I38 J22 |
| Date: | 2013–10–28 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0576&r=dcm |