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Intergenerational income mobility revisited: Estimation with an income dynamic model with heterogeneous age profile

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  • Chau, Tak Wai

Abstract

The traditional method of estimating intergenerational income elasticity by using the average income over a few years for each generation is subject to attenuation bias due to measurement error and lifecycle bias. In this paper, I estimate the intergenerational elasticity using an income dynamic model with intergenerational linkages. The model can explicitly account for sources of biases such as heterogeneous age profile and transitory shocks of changing variance over the lifecycle. The model can be identified through the covariance structure of earnings within individuals and across generations. Based on the models, I simulate the lifetime income of both generations and calculate the implied intergenerational elasticity.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 117 (2012)
Issue (Month): 3 ()
Pages: 770-773

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Handle: RePEc:eee:ecolet:v:117:y:2012:i:3:p:770-773

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Intergenerational mobility; Lifecycle bias; Income dynamics; Heterogeneous profile;

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References

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  1. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
  2. Pfeiffer, Friedhelm & Eisenhauer, Philipp, 2008. "Assessing Intergenerational Earnings Persistence Among German Workers," ZEW Discussion Papers 08-014, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Grawe, Nathan D., 2006. "Lifecycle bias in estimates of intergenerational earnings persistence," Labour Economics, Elsevier, vol. 13(5), pages 551-570, October.
  4. Eisenhauer, Philipp & Pfeiffer, Friedhelm, 2008. "Assessing intergenerational earnings persistence among German workers," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 41(2/3), pages 119-137.
  5. Gary S. Becker & Nigel Tomes, 1994. "Human Capital and the Rise and Fall of Families," NBER Chapters, in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 257-298 National Bureau of Economic Research, Inc.
  6. Jan Brenner, 2009. "Life-Cycle Variations in the Association between Current and Lifetime Earnings – Evidence for German Natives and Guest Workers," Ruhr Economic Papers 0095, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  7. Steven Haider & Gary Solon, 2006. "Life-Cycle Variation in the Association between Current and Lifetime Earnings," NBER Working Papers 11943, National Bureau of Economic Research, Inc.
  8. repec:iab:iabzaf:v:41:i:2/3:p:119-137 is not listed on IDEAS
  9. Anders Bohlmark & Matthew J. Lindquist, 2006. "Life-Cycle Variations in the Association between Current and Lifetime Income: Replication and Extension for Sweden," Journal of Labor Economics, University of Chicago Press, vol. 24(4), pages 879-900, October.
  10. Robert A. Moffitt & Peter Gottschalk, 2002. "Trends in the Transitory Variance of Earnings in the United States," Economic Journal, Royal Economic Society, vol. 112(478), pages C68-C73, March.
  11. Bhashkar Mazumder, 2005. "Fortunate Sons: New Estimates of Intergenerational Mobility in the United States Using Social Security Earnings Data," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 235-255, May.
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Cited by:
  1. Markus Jantti & Stephen P. Jenkins, 2014. "Income Mobility," Working Papers 319, ECINEQ, Society for the Study of Economic Inequality.

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