Intergenerational Mobility in Britain: Revisiting the Prediction Approach of Dearden, Machin and Reed
AbstractThe 'prediction approach' proposed by Dearden, Machin and Reed (DMR) consists in (1) regressing the observed incomes of the child and parent families on separate sets of predetermined variables, and (2) regressing the child's predicted income on that of the parents. Conceptually, this estimator must relate to the 2SLS/IV estimator. We re-derive the prediction estimator in matrix form, and reconsider its consistency requirements. The measurement model of DMR is then embedded within a simultaneous equations framework, for which an alternative 2SLS/IV estimator is proposed. The latter produces larger estimates for the intergenerational correlation. The policy relevance of the two sets of findings is then discussed.
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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 62.
Date of creation: Sep 2002
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Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp
Intergenerational mobility; measurement error; prediction approach; simultaneous equations.;
Other versions of this item:
- Ramses Abul Naga & Frank Cowell, 2002. "Intergenerational Mobility in Britain: Revisiting the Prediction Approach of Dearden, Machin and Reed," Cahiers de Recherches Economiques du DÃ©partement d'EconomÃ©trie et d'Economie politique (DEEP) 02.15, Université de Lausanne, Faculté des HEC, DEEP.
- Ramses H. Abul Naga & Frank Cowell, 2002. "Intergenerational mobility in Britain : revisiting the prediction approach of Dearden, Machin and Reed," LSE Research Online Documents on Economics 2221, 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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