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Inference on “earnings dynamics over the life cycle: New evidence for New Zealand”

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  • Paul Hansen

Abstract

This note re-examines the main finding of Creedy's (1997a) study of income dynamics in New Zealand: regression towards the mean of taxable income and negative serial correlation. The Wald tests he used to conduct statistical inference, as well as being asymptotic tests, are not invariant to reparam-eterisations of the non-linear restrictions that are tested to arrive at this result. An alternative small-sample testing strategy, based on linear restrictions, is used here, and Creedy's finding is confirmed.

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  • Paul Hansen, 1997. "Inference on “earnings dynamics over the life cycle: New evidence for New Zealand”," New Zealand Economic Papers, Taylor & Francis Journals, vol. 31(2), pages 221-227.
    • Handle: RePEc:taf:nzecpp:v:31:y:1997:i:2:p:221-227
    DOI: 10.1080/00779959709544275
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    References listed on IDEAS

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    1. Hart, P E, 1976. "The Dynamics of Earnings, 1963-1973," Economic Journal, Royal Economic Society, vol. 86(343), pages 551-565, September.
    2. Lafontaine, Francine & White, Kenneth J., 1986. "Obtaining any Wald statistic you want," Economics Letters, Elsevier, vol. 21(1), pages 35-40.
    3. Unknown, 1986. "Letters," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 1(4), pages 1-9.
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    5. Alexander, W. Robert J. & Hansen, Paul & Owen, P. Dorian, 1996. "Inference on productivity differentials in multi-sector models of economic growth," Journal of Development Economics, Elsevier, vol. 51(2), pages 315-325, December.
    6. Creedy, J & Hart, P E, 1979. "Age and the Distribution of Earnings," Economic Journal, Royal Economic Society, vol. 89(354), pages 280-293, June.
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    Cited by:

    1. Des O'Dea, 2000. "The Changes in New Zealand's Income Distribution," Treasury Working Paper Series 00/13, New Zealand Treasury.

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