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Analytical Prediction of Transitions Probabilities in the Conditional Logit Model

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Author Info
Bonin, Holger () (IZA Bonn)
Schneider, Hilmar (IZA Bonn)

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Abstract

The paper derives analytical transitions probabilities following an exogenous shock to the deterministic component in the conditional logit model. The solution draws on the postestimation distribution of the model’s stochastic component, identified on the basis of a direct utility maximization interpretation of agents’ revealed choice. Computational experiments confirm that analytical prediction of transitions probabilities might perform substantially better than the established calibration method with few repetitions. However, results obtained in an empirical application studying labor supply responses to social insurance reform in Germany suggest that previous calibration-based results accurately indicate the direction of incentive effects, while underpredicting small transitions frequencies.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1015.

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Length: 22 pages
Date of creation: Feb 2004
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Handle: RePEc:iza:izadps:dp1015

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Related research
Keywords: conditional logit model; logistic distributions; behavioral microsimulation; social insurance reform;

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Find related papers by JEL classification:
C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models
C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Gerfin, Michael & Leu, Robert E., 2003. "The Impact of In-Work Benefits on Poverty and Household Labour Supply A Simulation Study for Switzerland," IZA Discussion Papers 762, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Creedy, John & Duncan, Alan, 2002. " Behavioural Microsimulation with Labour Supply Responses," Journal of Economic Surveys, Blackwell Publishing, vol. 16(1), pages 1-39, February. [Downloadable!] (restricted)
  3. Euwals, Rob & van Soest, Arthur, 1999. "Desired and actual labour supply of unmarried men and women in the Netherlands," Labour Economics, Elsevier, vol. 6(1), pages 95-118, March. [Downloadable!] (restricted)
    Other versions:
  4. Duncan, Alan & Giles, Christopher, 1996. "Labour Supply Incentives and Recent Family Credit Reforms," Economic Journal, Royal Economic Society, vol. 106(434), pages 142-55, January. [Downloadable!] (restricted)
  5. Gourieroux, Christian & Monfort, Alain & Renault, Eric & Trognon, Alain, 1987. "Generalised residuals," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 5-32. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Olivier Bargain, 2004. "On modeling household labor supply with taxation," DELTA Working Papers 2004-14, DELTA (Ecole normale supérieure). [Downloadable!]
    Other versions:
  2. Schneider, Hilmar & Bonin, Holger, 2005. "Wohlfahrts- und Verteilungseffekte eines allgemeinen Freibetrags bei den Sozialabgaben (Welfare and distribution effects of a general fixed allowance for social insurance contributions)," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 38(4), pages 475-492. [Downloadable!]
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