Fixed Effects Logit Model Research Articles

Do Leverage, Dividend Policy and Profitability Influence Future Value of Firm? Evidence from India

This paper examines the effect of past dividend policy, leverage and profitability on the probability of increase in future value of the firm (in terms of market to book value ratio (MBVR)) for an emerging economy, India. It uses fixed effect logit model to predict the probability of increase in future value of the firms presently included in S&PCNX500 index. We found that there is a non-linear relation between leverage, profitability and probability of increase in future value of the firm. Probability of increase in future value of firm decreases exponentially with the increase in leverage, whereas, it increases with the raise in profitability of the firm. The relation of profitability and chances future value creation is stronger for foreign standalone firms as compared to private Indian standalone or business group owned firms.

Une analyse théorique et empirique des déterminants sous-jacents dans la prise de décision

Résumé Nous proposons dans cet article de nouvelles extensions au modèle de préférences sociales de Fehr et Schmidt [1999] : l’introduction des différences de gains entre les opposants et un élément simple de réciprocité. Afin de tester leur robustesse, nous procédons à l’estimation de modèles Logit à effets fixes à l’aide de données recueillies dans une expérience menée en laboratoire sur un jeu à trois joueurs avec une offre à prendre ou à laisser. Les résultats soulignent la significativité des extensions proposées, celles-ci tendant à mettre en évidence l’intérêt individuel plutôt qu’un sens de l’équité. Ce nouveau modèle fournit une prédiction plus précise des décisions individuelles que le modèle originel de Fehr et Schmidt.

Happiness and health: Well-being among the self-employed

Is well-being greater among the self-employed than among wage-earners? In order to investigate this question, data from the Swedish Level-of-Living Survey for the 2 years 1991 and 2000 are used and six indicators of well-being are considered: (1) job satisfaction, (2) life satisfaction, (3) whether the job is stressful, (4) whether the job is mentally straining, (5) mental health problems, and (6) poor general health. Six logit models are estimated and to handle the possible selection of more satisfied individuals and individuals more able to handle stress into self-employment, conditional fixed-effects logit models are estimated for each of the outcomes. We find that self-employment leads to an increase in job satisfaction. We also find a positive correlation between self-employment and life satisfaction. There is some evidence that self-employment leads to more mental health problems, and that the self-employed are less likely to perceive their job as mentally straining.

Willingness to pay for reduced visual disamenities from offshore wind farms in Denmark

Expansion of offshore wind power plays a significant role in the energy policies of many EU countries. However, offshore wind farms create visual disamenities. These disamenities can be reduced by siting wind farms at larger distances from the coast—and accepting higher costs per kWh produced. In this paper willingness to pay for reducing the visual disamenities from future offshore wind farms is elicited using the economic valuation method Choice Experiments. The valuation scenario comprises the location of 720 offshore wind turbines (equivalent to 3600 MW) in farms at distances equal to: 12, 18 or 50 km from the shore, relative to an 8 km baseline. Using a fixed effect logit model average willingness to pay amounts were estimated as: 46, 96 and 122 Euros/household/year for having the wind farms located at 12, 18 and 50 km from the coast as opposed to 8 km. The results also reveal that WTP deviates significantly depending on the age of respondents and their experiences with offshore wind farms.

CHILD LABOR AND SCHOOL ENROLLMENT IN RURAL INDIA: WHOSE EDUCATION MATTERS?

This paper empirically analyzes the determinants of child labor and school enrollment in rural Andhra Pradesh, India. A village fixed-effect logit model for each child is estimated with the incidence of child labor or school enrollment as the dependent variable, in order to investigate individual and household characteristics associated with the incidence. Among the determinants, this paper focuses on whose education matters most in deciding the status of each child, an issue not previously investigated in the context of the joint family system. The regression results show that the education of the child's mother is more important in reducing child labor and in increasing school enrollment than that of the child's father, the household head, or the spouse of the head. The effect of the child's mother is similar on boys and girls while that of the child's father is more favorable on boys.

Willingness to pay for energy-saving measures in residential buildings

This paper uses a choice experiment to evaluate the consumers' willingness to pay for energy-saving measures in Switzerland's residential buildings. These measures include air renewal (ventilation) systems and insulation of windows and facades. Two groups of respondents consisting respectively of 163 apartment tenants and 142 house owners were asked to choose between their housing status quo and each one of the several hypothetical situations with different attributes and prices. The estimation method is based on a fixed-effects logit model. The results suggest that the benefits of the energy-saving attributes are significantly valued by the consumers. These benefits include both individual energy savings and environmental benefits as well as comfort benefits namely, thermal comfort, air quality and noise protection.

Why do real estate brokers continue to discriminate? Evidence from the 2000 Housing Discrimination Study

This study examines racial and ethnic discrimination in discrete choices by real estate brokers using national audit data from the 2000 Housing Discrimination Study. It uses a fixed-effects logit model to estimate the probability that discrimination occurs and to study the causes of discrimination. The data make it possible to control for auditors' actual demographic and socioeconomic characteristics and characteristics assigned for the purposes of the audit. The study finds that discrimination remains strong but has declined in both the scope and incidence since 1989. The estimations also identify both brokers' prejudice and white customers' prejudice as causes of discrimination.

Maternal Employment and Latchkey Adolescents

Social scientists who have estimated the relationship between a mother’s work hours and the probability that her children care for themselves are often limited by cross‐sectional data and use of a small number of control variables. This study uses the National Longitudinal Survey of Youth and a fixed effects logit model to ask if maternal work hours are related to the probability that adolescents spend some time at home alone after school. Results demonstrate that the relationship exists and is nonlinear: only the adolescents of mothers who work more than 30 hours per week are more likely to spend time after school with no adult present, compared with the adolescent children of mothers who are not working. This finding suggests that if social welfare policies encourage low‐income mothers to work full‐time, these policies may increase the probability that their adolescent children spend some time at home alone after school.

How Frequently Do Consumer Prices Change in Austria? Evidence from Micro CPI Data

Based on individual price records collected for the computation of the Austrian CPI, average frequencies of price changes and durations of price spells are estimated to characterize price setting in Austria. Depending on the estimation method, prices are unchanged for 10 to 14 months on average. We find strong heterogeneity across sectors and products. Price increases occur only slightly more often than price decreases. The typical size of a price increase (decrease) is 11 (15) percent. The aggregate hazard function of prices is decreasing with time. Besides heterogeneity across products and price setters, this is due to oversampling of products with a high frequency of price changes. Accounting for unobserved heterogeneity in estimating the probability of a price change with a fixed-effects logit model, we find a positive effect of the duration of a price spell. During the Euro cash changeover the probability of price changes was higher.

Why Do Real Estate Brokers Continue to Discriminate? Evidence from the 2000 Housing Discrimination Study

This paper studies racial and ethnic discrimination in discrete choices by real estate brokers using national audit data from the 2000 Housing Discrimination Study. It uses a fixed effects logit model to estimate the probability that discrimination occurs and to study the causes of discrimination. The data set makes it possible to control for auditors’ actual demographic and socioeconomic characteristics, along with the characteristics assigned for the purposes of the audit. The study finds that discrimination continues to be strong but also documents a downward trend in both the scope and incidence of discrimination since 1989. The estimations also identify both brokers’ prejudice and white customers’ prejudice as causes of discrimination.

Determinants of income diversification amongst rural households in Southern Mali

Household-level panel data from a representative sample of rural households in Southern Mali describing the different sources of household income are used to examine the determinants of income diversification. A conditional fixed effects logit model is employed in the analysis to control for household-specific effects. We find evidence that poorer households have fewer opportunities in non-cropping activities such as livestock rearing and non-farm work, and hence less diversified incomes. This appears to reflect their relative lack of capital, which makes it difficult for them to diversify away from subsistence agriculture. The results also indicate that households in remote areas are less likely to participate in the non-cropping sector than their counterparts closer to local markets, while households with educated heads are more likely to participate in the non-farm sector than those with illiterate heads. The significance of entry-constraints in explaining portfolio diversification suggests that the role of government in making assets — as well as improved infrastructure — available to poorer households is still essential in promoting income diversification.

Bias in Conditional and Unconditional Fixed Effects Logit Estimation

Fixed-effects logit models can be useful in panel data analysis, whenNunits have been observed forTtime periods. There are two main estimators for such models: unconditional maximum likelihood and conditional maximum likelihood. Judged on asymptotic properties, the conditional estimator is superior. However, the unconditional estimator holds several practical advantages, and therefore I sought to determine whether its use could be justified on the basis of finite-sample properties. In a series of Monte Carlo experiments forT< 20, I found a negligible amount of bias in both estimators whenT≥ 16, suggesting that a researcher can safely use either estimator under such conditions. WhenT< 16, the conditional estimator continued to have a very small amount of bias, but the unconditional estimator developed more bias asTdecreased.

Assessing Stability and Change in Criminal Offending: A Comparison of Random Effects, Semiparametric, and Fixed Effects Modeling Strategies

An important theoretical problem for criminologists is an explanation for the robust positive correlation between prior and future criminal offending. Nagin and Paternoster (1991) have suggested that the correlation could be due to timestable population differences in the underlying proneness to commit crimes (population heterogeneity) andyor the criminogenic effect that crime has on social bonds, conventional attachments, and the like (state dependence). Because of data and measurement limitations, the disentangling of population heterogeneity and state dependence requires that researchers control for unmeasured persistent heterogeneity. Frequently, random effects probit models have been employed, which, while user-friendly, make a strong parametric assumption that the unobserved heterogeneity in the population follows a normal distribution. Although semiparametric alternatives to the random effects probit model have recently appeared in the literature to avoid this problem, in this paper we return to reconsider the fully parametric model. Via simulation evidence, we first show that the random effects probit model produces biased estimates as the departure of heterogeneity from normality becomes more substantial. Using the 1958 Philadelphia cohort data, we then compare the results from a random effects probit model with a semiparametric probit model and a fixed effects logit model that makes no assumptions about the distribution of unobserved heterogeneity. We found that with this data set all three models converged on the same substantive result—even after controlling for unobserved persistent heterogeneity, with models that treat the unobserved heterogeneity very differently, prior conduct had a pronounced effect on subsequent offending. These results are inconsistent with a model that attributes all of the positive correlation between prior and future offending to differences in criminal propensity. Since researchers will often be completely blind with respect to the tenability of the normality assumption, we conclude that different estimation strategies should be brought to bear on the data.

Immigrant Assimilation and Welfare Participation: Do Immigrants Assimilate into or Out of Welfare?

This paper analyzes differences in welfare utilization between immigrants and natives in Sweden using a large panel data set, LINDA, for the years 1990 to 1996. Both welfare expenditures and immigration increased substantially in Sweden in the 1990's. We find that immigrants use welfare to a greater extent than natives and that non-refugee immigrants utilize social assistance less than refugee immigrants. Differences in welfare participation and number of months on welfare between immigrants and natives cannot be explained by observable socioeconomic characteristics. Using a random effects probit model, we find that immigrants lower their participation rates in welfare with time spent in Sweden. Refugees display substantially higher public assistance participation rates upon arrival in Sweden compared to non-refugee immigrants, but they assimilate out of welfare at a faster rate than non-refugee immigrants. Neither immigrant group is predicted to reach the participation rates of native households within a 20 year period in Sweden. A fixed effects logit model supports these findings. The predicted differences in the length of social assistance spells follow a very similar pattern. Simulations of the move to a national uniform benefits structure in 1998 show a decrease in the participation rate and in expenditures.

The equivalence of two estimators of the fixed-effects logit model

This note shows that the scale-adjusted maximum likelihood estimator suggested by a result of [ Andersen, 1973. Conditional inference and models for measuring. Mentalhygiejnisk Forlag, Copenhagen.] is equivalent to the conditional logit estimator of [ Chamberlain, 1980. Analysis of covariance with qualitative data. Review of Economic Studies 47, 225–238.] for the fixed-effects logit model with two time periods. © 1997 Elsevier Science S.A.