Estimating Continuous-Time Income Models
AbstractA fundamental component of inter-temporal consumption-saving and portfolio allocation models is a statistical model of the income process. While income processes are commonly unobservable income flows which evolve in continuous time, observable income data are usually discrete, having been aggregated over time. We consider continuous-time earning processes, specifically non-linearly transformed Ornstein-Uhlenbeck processes, and the associated integrated, i.e. time aggregated process. Both processes are characterized, and we show that time aggregation alters important statistical properties. The parameters of the earning process are estimable by GMM, and the finite sample properties of the estimator are investigated. Our methods are applied to annual earnings data for the US. It is demonstrated that the model replicates well important features of the earnings distribution.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Center for Quantitative Economics (CQE), University of Muenster in its series CQE Working Papers with number 1811.
Length: 36 pages
Date of creation: Jan 2011
Date of revision:
Contact details of provider:
Postal: Am Stadtgraben 9, 48143 Münster, Germany
Web page: http://www1.wiwi.uni-muenster.de/cqe/
More information through EDIRC
income processes; integrated non-linearly transformed Ornstein-Uhlenbeck process; temporal aggregation;
Other versions of this item:
- Schluter, Christian & Trede, Mark, 2010. "Estimating continuous-time income models," Discussion Paper Series In Economics And Econometrics 1014, Economics Division, School of Social Sciences, University of Southampton.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-05 (All new papers)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Susanne Deckwitz).
If references are entirely missing, you can add them using this form.