scholarly journals Dynamic Implications of Subjective Expectations: Evidence from Adult Smokers

2014 ◽  
Vol 6 (1) ◽  
pp. 1-37 ◽  
Author(s):  
Yang Wang
Keyword(s):  
Rational Expectations ◽  
Choice Model ◽  
Unobserved Heterogeneity ◽  
Policy Implications ◽  
Mortality Data ◽  
Dynamic Discrete Choice ◽  
Subjective Expectations ◽  
Survival Probabilities ◽  
Dynamic Discrete Choice Model ◽  
Set Up

We set up a dynamic discrete choice model with subjective expectations data to explain adult smokers’ smoking decisions. We find important differences between subjective survival probabilities and those estimated using observed mortality data. Subjectively, individuals attach less weight to their health conditions and smoking choices and more weight to such factors as age, race, and parents’ longevity. Moreover, adult smokers are found to care more about their health and to be more forward-looking than predicted by a rational expectations framework. We further show the importance of unobserved heterogeneity in agents’ subjective survival probabilities, and discuss policy implications of subjective expectations. (JEL D12, D84, I12)

scholarly journals Imperfect information and participation in insurance markets: evidence from Italy

2018 ◽  
Vol 78 (2) ◽  
pp. 183-194 ◽  
Author(s):  
Fabio Gaetano Santeramo
Keyword(s):  
Imperfect Information ◽  
Choice Model ◽  
Crop Insurance ◽  
Policy Implications ◽  
Dynamic Discrete Choice ◽  
Content Type ◽  
Dynamic Discrete Choice Model ◽  
Insurance Contracts ◽  
Level Data

Purpose The purpose of this paper is to investigate how experience in insurance contracts may influence participation in the Italian crop insurance market. Design/methodology/approach From Italian farm-level data, the author estimates a dynamic discrete choice model of participation to investigate the role of experience. The methodology, coupled with exploratory analysis of the data, allows one to compare the relevance of different sources of experience in the crop insurance decision-making process. Findings The author found that experience tends to be a catalyst for insurance participation. Policy implications are discussed, in particular, the author discusses on the importance of bolstering uptake to exploit the advantages of the inertia that emerge from experience, and the importance of initiatives to increase the knowledge of crop insurance instruments. Originality/value To the best of the author’s knowledge, the role of experience has been underinvestigated. The analysis has the specific contribution of modeling the potential role of experience (exploited after buying an insurance contract) on uptake in crop insurance programs.

Adjustment Costs and Irreversibility as Determinants of Investment: Evidence from African Manufacturing

2005 ◽  
Vol 4 (1) ◽  
Author(s):  
Arne Bigsten ◽  
Paul Collier ◽  
Stefan Dercon ◽  
Marcel Fafchamps ◽  
Bernard Gauthier ◽  
...  
Keyword(s):  
Discrete Choice ◽  
Choice Model ◽  
Adjustment Costs ◽  
Manufacturing Firms ◽  
Fixed Costs ◽  
Dynamic Discrete Choice ◽  
African Countries ◽  
Dynamic Discrete Choice Model ◽  
Capital Adjustment ◽  
Investment Patterns

Abstract In this paper we investigate if the predictions of three different models of capital adjustment costs are consistent with the observed investment patterns among manufacturing firms in five African countries. We document a high frequency of zero investment episodes, which is consistent with both fixed adjustment costs and irreversibility and inconsistent with quadratic adjustment costs. We model the decision to invest using a dynamic discrete choice model and find evidence of irreversibility and not fixed costs. We finally model the investment rate as a function of the size of the capital disequilibrium. The results confirm that irreversibility is an important factor affecting the investment behaviour of African manufacturing firms. Some implications of this finding are discussed.

scholarly journals Efficient Forestation in the Brazilian Amazon: Evidence from a Dynamic Model

2020 ◽  
Author(s):  
Rafael Araujo ◽  
Francisco J M Costa ◽  
Marcelo Sant'Anna
Keyword(s):  
Land Use ◽  
Forest Cover ◽  
Choice Model ◽  
Substantial Part ◽  
Dynamic Discrete Choice ◽  
Carbon Taxes ◽  
Cattle Production ◽  
Dynamic Discrete Choice Model ◽  
Long Run ◽  
Business As Usual

This paper estimates the Brazilian Amazon’s efficient forestation level. We propose a dynamic discrete choice model of land use and estimate it using a remote sensing panel with land use and stock of carbon of 5.7 billion pixels, at 30 meters resolution, between 2008 and 2017. We estimate that a business as usual scenario will generate an inefficient loss of 1,075,000 km2 of forest cover in the long run, an area almost two times the size of France, implying the release of 44 billion tons of CO2. We quantify the potential of carbon and cattle production taxes to mitigate inefficient deforestation. We find that relatively small carbon taxes can mitigate a substantial part of the inefficient forest loss and emissions, while only very large taxes on cattle production would achieve a similar effect.

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