Non-Parametric Identification and Estimation of Truncated Regression Models

In this paper, we consider non-parametric identification and estimation of truncated regression models in both cross-sectional and panel data settings. For the cross-sectional case, Lewbel and Linton (2002) considered non-parametric identification and estimation through continuous variation under a log-concavity condition on the error distribution. We obtain non-parametric identification under weaker conditions. In particular, we obtain non-parametric identification through discrete variation under a non-periodicity condition on the hazard function of the error distribution. Furthermore, we show that the presence of continuous regressors may lead to stronger identification results. Our non-parametric estimator is shown to be consistent and asymptotically normal, and outperforms that of Lewbel and Linton (2002) in a simulation study. For the panel data setting, we provide the first systematic treatment of non-parametric identification and estimation of the truncated panel data model with fixed effects by extending our treatment of the cross-sectional case. We also consider various other extensions.     

A panel data model for subjective information on household income growth

Subjective expectations about future income changes are analyzed, using household panel data. The models used are extensions of existing binary choice panel data models to the case of ordered response. We consider static models with random and fixed individual effects. We also look at a dynamic random effects model which includes a measure for permanent and transitory income. We find that income change expectations strongly depend on realized income changes in the past: those whose income fell, are more pessimistic than others, while those whose income rose are more optimistic. Expected income changes are also significantly affected by employment status, family composition, permanent income, and past expectations. Expectations are then compared to the head of household’s ex post perception of the realized income change for the same period. The main finding is that rational expectations are rejected, and that in particular, households whose income has decreased in the past underestimate their future income growth.     

Convenient estimators for the panel probit model: Further results

Bertschek and Lechner (1998) propose several variants of a GMM estimator based on the period specific regression functions for the panel probit model. The analysis is motivated by the complexity of maximum likelihood estimation and the possibly excessive amount of time involved in maximum simulated likelihood estimation. But, for applications of the size considered in their study, full likelihood estimation is actually straightforward, and resort to GMM estimation for convenience is unnecessary. In this note, we reconsider maximum likelihood based estimation of their panel probit model then examine some extensions which can exploit the heterogeneity contained in their panel data set. Empirical results are obtained using the data set employed in the earlier study. Helpful comments and suggestions by Irene Bertschek and Michael Lechner are gratefully acknowledged. This paper has also benefited from comments by two anonymous referees and from seminar participants at the Center for Health Economics at the University of York. Any remaining errors are the responsibility of the author.     

Using an integrated choice and latent variable model to understand the impact of “professional” respondents in a stated preference survey

Internet panels are increasingly used for stated preference research. Because members of such panels receive compensation for each completed survey, one concern is that over time this creates professional respondents who answer surveys solely for the monetary compensation. We identify professional respondents using data on panel tenure, survey response frequency, completion rate and total number of completed surveys. We find evidence of two types of professional respondents: “hyperactives” who answer surveys frequently and “experienced” who have long panel tenure and a large number of completed surveys. Using an integrated choice and latent variable model on stated preference survey data, we find that “hyperactive” respondents are less likely to choose the 'status quo’ and have a more stochastic choice process as seen from the econometrician's point of view, whereas “experienced” respondents have a relatively more deterministic choice process. Our results show that “hyperactive” respondents significantly impact estimated values.     

MEASUREMENT ERROR IN THE BANK OF ITALY'S SURVEY OF HOUSEHOLD INCOME AND WEALTH

This paper is aimed at evaluating the incidence of measurement error in the Bank of Italy's Survey of Household Income and Wealth (SHIW). In the case of time-invariant variables, we assess the degree of inconsistency of answers given by panel households in subsequent survey waves. For quantities that vary with time, we estimate the incidence of measurement error by decomposing observed variability into true dynamics and error-induced noise. We apply the Heise model or the latent Markov model, depending on whether the data are continuous or categorical. We also present regression models that explain the error-generating process. Our results are relevant to researchers who use SHIW data for economic analysis, but also to data producers involved in similar income and wealth surveys. The methods we describe and test can be employed in a number of contexts to gain better understanding of data-related problems and plans for survey improvement.     

Foreign direct investment in OECD countries: a special focus in the case of Greece

Foreign Direct Investment (FDI) is considered as an important instrument for economic development all over the world. The aim of this paper is to examine the FDI inflows determinants for 24 OECD countries. To this end we employ annual data from 1980 to 2012 for a series of potential FDI determinants that have been identified as the most important by the relevant literature. Our empirical strategy employs both the standard fixed effects panel as well as a dynamic panel approach. The empirical findings highlight the importance of market size, trade openness, unit labor cost, schooling, taxation, gross capital formation, institutional variables, and ROA/ROE as significant FDI determinants. In the case of the dynamic panel model those FDI inflows determinants are not uniform for all country groups. Additionally, the results indicate that corporate tax rates clearly affect FDI attractiveness. This finding is robust when testing different countries subgroups. The present study has important policy implications indicating the factors that host economies should place emphasis on in order to attract FDI inflows. Policy makers should not only pay attention to the corporate tax rate level but they should also design a simple, stable and transparent taxation system that minimizes the relevant business risk.     

Using PDA consistency checks to increase the precision of profits and sales measurement in panels

Personalized Digital Assistants (PDAs) and other forms of hardware needed to collect survey data electronically have become more affordable and powerful in recent years, leading to their use in a number of surveys in developing countries. Simple use of these devices can offer the prospect of more timely data entry and greater accuracy in guiding respondents through skip patterns. Further benefits are possible through the use of more complex consistency checks. We use PDAs to measure sales and profits for microenterprises, which are notoriously noisy. Consistency checks in the cross-section compare sales and profits, while those in the panel query responses which result in large changes from one period to the next. Cross-sectional checks also served as a second prompt in the case of missing profits. These checks do succeed in reducing the standard deviation and in increasing the correlation of the observations for which corrections are made. However, we find that the vast majority of large changes in enterprise sales and profits are confirmed by firm owners as genuine, highlighting the volatility of income in this sector. As a result, the overall impact of these consistency checks on the full sample is rather limited, suggesting that while such checks are useful if computerized forms of data collection are being used, the consistency checks per se are not a strong reason for using computerized data collection in collecting firm profits and sales.     

Variation in Health Expenditures: Is It Just Income or other Factors? Empirical Investigation Using a Panel of Indian States

The primary query of this paper centres on the role played by income in determining the extent of fund allocated by Indian states for improvement of health of its population. Drawing data from the fourteen major states of India over a time span of twenty-three financial years (1974–75 to 1996–97) and using recent advances in panel data time series econometrics, this paper documents the presence of a long run relationship between income and health expenditure. The long-run elasticity estimates reiterate that publicly provided health services should be considered as “necessities”. Results the panel error correction model demonstrate that ageing of the population and proportion of rural population are the only non-income factors, which exert a significant positive impact on real per capita health expenditure. This is particularly important given the demographic transition that India is passing through.

     

Rural Panel Surveys in Developing Countries: A Selective Review

Rural panel surveys are the most appropriate source of data for studying the unprecedented rapid migration and urbanization currently taking place in China and other developing countries. This paper provides a selective review, focusing on the panel survey methodologies of several studies, which are organized based on our proposed four key elements of panel surveys: representativeness, retrospect-prospect, multilevel tracking, and temporality. To maximize heterogeneity in urbanization and development over the last three decades, we select rural panel surveys from five Asian countries: India, Indonesia, Nepal, Thailand, and China. We analyze the strengths and weaknesses of the selected panel surveys to provide directions for designing future rural panel surveys in China and elsewhere in the developing world.     

Reexamining the PPP hypothesis: A nonlinear asymmetric heterogeneous panel unit root test

In this study, we re-examine the PPP hypothesis in the light of the new developments in the unit root testing literature. The recent theoretical findings have pointed out that the real exchange rate series exhibit asymmetric nonlinear behavior. A unit root test applied to analyze the PPP hypothesis therefore, should also take into account this asymmetry inherent in the real exchange rate. Different unit root tests that consider the presence of these data features have been developed in the time series literature. However, a true attempt to test the PPP hypothesis should take a panel data approach. To this end, we propose a nonlinear heterogeneous panel unit root test where the alternative hypothesis allows for symmetric or asymmetric exponential smooth transition autoregressive nonlinearity and provide its finite sample properties. We apply our test to the real exchange rates of the 15 European Union countries against the US dollar. While the results of the linear and symmetric nonlinear heterogeneous panel unit root tests are against the PPP hypothesis, the asymmetric nonlinear heterogeneous panel test that we propose gives support for the PPP hypothesis as expected. Therefore, the conclusions drawn from the linear panel unit root tests or the nonlinear panel unit root tests that do not take asymmetry into account might be misleading.     

The marginal utility of income

In normative public economics it is crucial to know how fast the marginal utility of income declines as income increases. One needs this parameter for cost-benefit analysis, for optimal taxation and for the (Atkinson) measurement of inequality. We estimate this parameter using four large cross-sectional surveys of subjective happiness and two panel surveys. Altogether, the data cover over 50 countries and time periods between 1972 and 2005. In each of the six very different surveys, using a number of assumptions, we are able to estimate the elasticity of marginal utility with respect to income. We obtain very similar results from each survey. The highest (absolute) value is 1.34 and the lowest is 1.19, with a combined estimate of 1.26. The results are also very similar for subgroups in the population. Thus, on the basis of our estimates, the marginal utility of income declines somewhat faster than in proportion to the rise in income.     

The UK technology foresight programme: An assessment of expert estimates

Since the early 1990s, ‘Technology Foresight’ exercises with special emphasis on the use of Delphi surveys have played an important role in science and technology (S + T) policy across Europe in an effort to focus resource allocation. Yet, none of the estimates made in the European Delphi surveys have been formally assessed in retrospect, while this process has been incorporated into the Japanese surveys since 1996. Taking the UK Technology Foresight Programme, this research sets out to assess the estimates of three of the fifteen panel Delphi surveys. Whilst on average 2/3 of Delphi statements were predicted to be realised by 2004, it will be shown that only a fraction of these statements had been realised by 2006. Based on the evidence collected from the published panel reports, the ‘Hindsight on Foresight’ survey conducted by OST in 1995 and interviews with panel members, it will be argued that the overwhelming majority of estimates were overly optimistic. While optimism and strategic gaming of experts is the most convincing explanation for these results, process factors were also explored, including the quality of expert panels used, the Delphi statements and the respondents of the Delphi questionnaire. It is argued that at least the issue of short-range optimism and strategic gaming of experts should be addressed in future Delphi exercises, as decision makers relying on expert advice cannot deal with this issue alone.     

Household survey data for research on well-being and behavior in Central Asia

This paper summarizes the micro-level survey evidence from Central Asia generated and analyzed in the period 1991–2012. We provide an exhaustive overview over all accessible individual and household-level surveys undertaken in Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan – and of all academic papers published using these datasets. We argue that Central Asia is a fascinating region for the study of comparative economics given its dual experience of transition and development. However, the region is also understudied, in part due to lack of data, and especially due to a lack of panel data. We identify knowledge gaps derived from this lack of longitudinal surveys and suggest worthwhile areas for future research. Finally, we also present a new and novel individual-level panel dataset called “Life in Kyrgyzstan”.     

Why did UK manufacturing profitability rise over the 1980s?

Profitability in UK manufacturing collapsed in the early 1980s, but then recovered to 1970s levels. To account for the changes in profits we propose a series of extensions of the widely-used Cowling and Waterson (1976) model. Our extensions incorporate demand shocks, varying competition and collusion, and the role of unions. The resulting model encompasses Cowling/Waterson, the Kreps and Scheinkman (1983) varying competition model and the Green and Porter (1984) and Rotemberg and Saloner (1986) varying collusion models. Using a panel of 53 UK industries, 1973–1986 we estimate the encompassing model by generalised methods of moments/instrumental variables. Our major findings are: (a) there is no substantial contribution to changes in aggregate profitability from the batting average effect of movements between sectors; (b) the collapse of profits in the early 1980s was mainly driven by the collapse in demand; (c) the fall in union density in the 1980s has increased profitability despite a fall in concentration. We also find tentative evidence suggesting that collusion is pro-cyclical as in Green and Porter (1984).For very useful comments I thank Josef Falkinger, Paul Geroski and David Audretsch. I thank Chris Martin for letting me use much of our joint work and Ian Small for the data.     

Effects of longevity and dependency rates on saving and growth: Evidence from a panel of cross countries

While earlier empirical studies found a negative saving effect of old-age dependency rates without considering longevity, recent studies have found that longevity has a positive effect on growth without considering old-age dependency rates. In this paper, we first justify the related yet independent roles of longevity and old-age dependency rates in determining saving and growth by using a growth model that encompasses both neoclassical and endogenous growth models as special cases. Using panel data from a recent World Bank data set, we then find that the longevity effect is positive and the dependency effect is negative in savings and investment regressions. The estimates indicate that the differences in the demographic variables across countries or over time can well explain the differences in aggregate savings rates. We also find that both population age structure and life expectancy are important contributing factors to growth.     

Asymmetric effects of trade costs on entry modes: Firm level evidence

Standard foreign direct investment (FDI) theory suggests that falling trade costs should discourage horizontal FDI. Most FDI is horizontal. Yet, the world witnessed an FDI boom in 1990s, a period of striking falls in trade barriers. This paper carries out an empirical analysis with rich, firm-level data on the activities of Swedish multinationals around the globe in manufacturing sectors from 1987 to 1998 to shed light on this apparent conflict. The analysis is based on the predictions of a recent literature with an industrial organization (IO) angle: Trade costs have asymmetric effects on foreign expansion modes. This view posits that falling trade costs encourage entry realized as mergers and acquisitions (M&As), one of the potential explanations for the conflict between received theory and recent trends in FDI. Empirical results confirm the findings of this recent literature and add to it by testing its extensions.     

Models for count data with endogenous participation

We present several extensions of the Poisson and negative binomial models for count data based on the lognormal model for latent heterogeneity in the conditional means. The lognormal model provides a versatile specification that is more flexible than the familiar log gamma form, and provides a platform for several “two part” extensions that have appeared in the literature, including zero inflation, hurdle and sample selection models. We then extend these received two- part models by allowing for endogeneity of the participation equation. We conclude with a detailed application using the data employed in a recent study of the German health care system.      

FINDING THE POOR

As a basis for judging how public policy affects the poor, this article explores how "poor" families may be defined and how well such families can be distinguished from other families in the less developed countries. This is done by seeking proxies for poverty which are relatively easy to measure, accurate in discriminating between the poor and the non-poor, and relevant to public policy. To this end, a highly parsimonious model is developed, based on truncation and regression procedures, using only family size and number of wage earners in addition to either income or an education-age combination. Application of this model to data from household surveys in three major cities of Latin America shows that the model is highly effective in pinpointing poverty households, although the pattern of errors is not random, the most frequent type of error being to classify poverty households as non-poor.
Especially significant is that the model is nearly as effective for discriminating poverty households from others when financial variables are excluded as when they are included. This would suggest that a good deal of flexibility exists in deciding what variables to include in future studies of this type. The results also suggest that even better results should be possible if more complete information is obtained on the employment status of the different members of the household and on the contribution of each to household income. Ideally, the data collection and model development should proceed in an iterative manner since there are numerous possible variables as well as alternative model formulations.     

国内市场运行效率的互联网驱动* ——计量模型与案例调研的双重验证

本文从宏观和中观两个层面考察互联网对国内市场运行的影响，围绕市场整合和行业运行两个效率评判维度进行机制分析，并综合运用面板数据模型和多案例分析方法加以考察验证。研究结果表明：互联网因素对于国内市场运行的影响存在着不同范畴的结构差异，互联网发展倾向于增进流通业效率而可能妨碍统一市场，未来应理性认识互联网对于国内市场运行的真实驱动，着重利用互联网技术优化商流运行和提高流通业效率，同时也要重视线下交易制度和实体型交易关系对于推进国内统一市场的实质性作用，避免因忽视实体流通业发展和混淆互联网驱动而加剧国内市场分割。     

Long-run Study of Residential Water Consumption

The estimation of dynamic models and themeasure of long-run effects arerare in residential water demand studies. Weshow in this paper that a dynamicmodel of water consumption can be derived froma structural optimisation programsolved by local communities. Thisnonlinear model is estimated on asample of French municipalities and is foundasymptotically equivalent to a dynamic panel data model that is linear in theparameters. The latter includes anoriginal error-component structure that allowsfor a flexible heterogeneity pattern, including both the usual idiosyncraticeffect, and an additional individualeffect affected by a multiplicative time-varyingparameter. As usual GMM estimators for panel data are not consistent inthis case, we propose a new GMMprocedure that yields consistent and efficientestimates of short- and long-runprice elasticities (respectively −0.26 and−0.40).