Analytical Prediction of Transitions Probabilities in the Conditional Logit Model

Holger Bonin () and Hilmar Schneider ()

No 1015, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: behavioral microsimulation; logistic distributions; conditional logit model; social insurance reform (search for similar items in EconPapers)
JEL-codes: C15 C35 J22 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2004-02
New Economics Papers: this item is included in nep-dcm and nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published - published in: Economics Letters, 2006, 90 (1), 102-107

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Related works:
Journal Article: Analytical prediction of transition probabilities in the conditional logit model (2006)
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