On Interaction Effects: The Case of Heckit and Two-Part Models

Interaction effects capture the impact of one explanatory variable x1 on the marginal effect of another explanatory variable x2. To explore interaction effects, socalled interaction terms x1x2 are typically included in estimation specifications. While in linear models the effect of a marginal change in the interaction term is equal to the interaction effect, this equality generally does not hold in non-linear specifi cations (AI, NORTON, 2003). This paper provides for a general derivation of interaction effects in both linear and non-linear models and calculates the formulae of the interaction effects resulting from HECKMAN's sample selection model as well as the Two-Part Model, two regression models commonly applied to data with a large fraction of either missing or zero values in the dependent variable, respectively. Drawing on a survey of automobile use from Germany, we argue that while it is important to test for the significance of interaction effects, their size conveys limited substantive content. More meaningful, and also more easy to grasp, are the conditional marginal effects pertaining to two variables that are assumed to interact

Mitigating Hypothetical Bias Evidence on the Effects of Correctives from a Large Field Study

The overestimation of willingness-to-pay (WTP) in hypothetical responses is a wellknown finding in the literature. Various techniques have been proposed to remove or, at least, reduce this bias. Using responses from a panel of about 6,500 German households on their WTP for a variety of power mixes, this article undertakes an analysis that combines two common ex-ante approaches - cheap talk and consequential script - with the ex-post certainty approach to calibrating hypothetical WTP responses. Based on a switching regression model that accounts for the potential endogeneity of respondent certainty, we find that while neither the cheap-talk nor the consequential script corrective bears on the estimates of WTP, there is evidence for a lower WTP among those respondents who classify themselves as definitely certain about their answers.Die Überschätzung von Zahlungsbereitschaften in hypothetischen Befragungssituationen ist ein in der Literatur wohlbekanntes Phänomen. Um diese Verzerrungen zu verhindern oder zumindest zu reduzieren, wurden verschiedene Ansätze vorgeschlagen, darunter die Cheap Talk und Consequential Script genannten Ex-Ante Ansätze sowie ein als Sicherheits-Ansatz bezeichnetes Ex-Post-Korrektiv. Auf Grundlage einer Befragung von etwa 6.500 deutschen Haushalten zu ihrer Zahlungsbereitschaft für verschiedene Strommixe analysiert dieser Artikel die Effektivität dieser Korrektive. Basierend auf einem Switching-Regression-Model, welches die potenzielle Endogenität der Sicherheit der Befragten berücksichtigt, finden wir empirische Evidenz dafür, dass sich weder Cheap Talk noch der Consequential-Script Ansatz auf die geschätzten Zahlungsbereitschaften auswirkt. Es findet sich jedoch eine geringere Zahlungsbereitschaft unter solchen Antwortenden, die sich selbst als ganz sicher in Bezug auf ihre Antworten einstufen

On the Restrictiveness of Separability: The Significance of Energy in German Manufacturing

Any researcher would certainly agree with Hamermesh?s (1993:34) intuition about separability that the ease of substitution between any two production factors should be unaffected by a third factor that is separable from the others. This paper emphasizes that such a notion of separability needs to be more restrictive than the classical separability concept is.We thus coin the notion of strict separability that implies the classical concept. By applying both separability concepts in a translog approach to German manufacturing data (1978?1990), we focus on the empirical question of whether the omission of energy affects the conclusions about the ease of substitution among nonenergy factors. We find ample empirical evidence to doubt the assumption that energy is separable from all other production factors even in the relatively mild form of classical separability. At least under separability aspects, therefore, energy appears to be an indispensable production factor

Driving for Fun? - A Comparison of Weekdays and Weekend Travel

Focusing on individual motorists in car-owning households in Germany, this paper econometrically investigates the determinants of automobile travel with the specific aim of quantifying the effects of fuel prices and person-level attributes on travel conducted over a five-day week and weekend. Our analysis is predicated on the notion that car use is an individual decision, albeit one that is dependent on intra-household allocation processes, thereby building on a growing body of literature that has identified the importance of socioeconomic factors such as employment status, gender, and the presence of children in determining both access to the car and distance driven. To capture this two-stage decision process, we employ the Two-Part Model, which consists of Probit and OLS estimators, and derive elasticity estimates that incorporate both the discrete and continuous choices pertaining to car use.With fuel price elasticity estimates ranging between -0.42 and -0.48, our results suggest raising prices via fuel taxes to be a promising energy conservation and climate protection measure

A Regression on Climate Policy - The European Commission's Proposal to Reduce CO2 Emissions from Transport

As part of its efforts to reach the targets of the Kyoto Protocol, the European Commission is currently considering a new directive to reduce the per-kilometer CO2 emissions of newly registered automobiles. This paper critically assesses this proposal with respect to its economic and technological underpinnings. We argue that the proposal's reliance on targets based on per-kilometer emissions not only conceals the true costs of compliance and thereby stifles informed public discourse, but is also less cost-effective than alternative measures such as emissions trading. We further examine the proposal's underlying assumptions, finding that these misrepresent the current state of automotive technology and therefore may overestimate the feasibility of achieving the suggested emissions targets. Alternative targets are consequently proposed that are argued to more accurately reflect the industry's technological evolution to date

Economic Impacts from the Promotion of Renewable Energy Technologies - The German Experience

The allure of an environmentally benign, abundant, and cost-effective energy source has led an increasing number of industrialized countries to back public financing of renewable energies. Germany's experience with renewable energy promotion is often cited as a model to be replicated elsewhere, being based on a combination of far-reaching energy and environmental laws that stretch back nearly two decades. This paper critically reviews the current centerpiece of this effort, the Renewable Energy Sources Act (EEG), focusing on its costs and the associated implications for job creation and climate protection. We argue that German renewable energy policy, and in particular the adopted feed-in tariff scheme, has failed to harness the market incentives needed to ensure a viable and cost-effective introduction of renewable energies into the country's energy portfolio. To the contrary, the government's support mechanisms have in many respects subverted these incentives, resulting in massive expenditures that show little long-term promise for stimulating the economy, protecting the environment, or increasing energy security