A Note on the Estimation of Intergenerational Income Correlations by the Method of Averaging
AbstractAveraging methods are routinely used in order to limit biases resulting from the mismeasurement of permanent incomes. The Solon/Zimmerman estimator regresses a single-year measurement of the child's resources on a T-period average of the parents' income while the Behrman/Taubman estimator regresses an S-period average of the child's resources on a T-period average of the parents' income. The latter estimator is shown to be the arithmetic mean of the S slope estimates arising from the Solon/Zimmerman methodology. However, because sampling variation produces yearly changes in the variance of children's incomes, it is shown that the Behrman/Taubman estimator is not efficient in the class of estimators which can be expressed as a weighted sum of the S distinct Solon/Zimmerman estimates. The minimum variance estimator in the above class is thus derived and applied to a US sample.
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Bibliographic InfoPaper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Distributional Analysis Research Programme Papers with number 54.
Date of creation: Jan 2001
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Welfare index; inequality; poverty; sample; inference.;
Other versions of this item:
- Ramses H. ABUL NAGA, 2000. "A Note on the Estimation of Intergenerational Income Correlations by the Method of Averaging," Cahiers de Recherches Economiques du DÃ©partement d'EconomÃ©trie et d'Economie politique (DEEP) 00.14, Université de Lausanne, Faculté des HEC, DEEP.
- Ramses H. Abul Naga, 2001. "A note on the estimation of intergenerational income correlations by the method of averaging," LSE Research Online Documents on Economics 6562, London School of Economics and Political Science, LSE Library.
- I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
- J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
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- Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
- Bjorklund, Anders & Jantti, Markus, 1997. "Intergenerational Income Mobility in Sweden Compared to the United States," American Economic Review, American Economic Association, vol. 87(5), pages 1009-18, December.
- Behrman, Jere R & Taubman, Paul, 1990. "The Intergenerational Correlation between Children's Adult Earnings and Their Parents' Income: Result from the Michigan Panel Survey of Income Dynamics," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 36(2), pages 115-27, June.
- Zimmerman, David J, 1992. "Regression toward Mediocrity in Economic Stature," American Economic Review, American Economic Association, vol. 82(3), pages 409-29, June.
- Bowles, Samuel, 1972. "Schooling and Inequality from Generation to Generation," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages S219-S51, Part II, .
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