The age-time-cohort problem and the identification of structural parameters in life-cylce models
AbstractThe standard approach to estimating structural parameters in life-cycle models imposes sufficient assumptions on the data to identify the “age profile” of outcomes, then chooses model parameters so that the model’s age profile matches this empirical age profile. I show that the standard approach is both incorrect and unnecessary: incorrect, because it generally produces inconsistent estimators of the structural parameters, and unnecessary, because consistent estimators can be obtained under weaker assumptions. I derive an estimation method that avoids the problems of the standard approach. I illustrate the method’s benefits analytically in a simple model of consumption inequality and numerically by reestimating the classic life-cycle consumption model of Gourinchas and Parker (2002).
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Bibliographic InfoPaper provided by Federal Reserve Bank of Minneapolis in its series Working Papers with number 707.
Date of creation: 2013
Date of revision:
Other versions of this item:
- Sam Schulhofer-Wohl, 2012. "The Age-Time-Cohort Problem and the Identification of Structural Parameters in Life-Cycle Models," 2012 Meeting Papers 575, Society for Economic Dynamics.
- NEP-ALL-2013-07-15 (All new papers)
- NEP-DEM-2013-07-15 (Demographic Economics)
- NEP-DGE-2013-07-15 (Dynamic General Equilibrium)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sam Schulhofer-Wohl & Yang Yang, 2011. "Modeling the evolution of age and cohort effects in social research," Staff Report 461, Federal Reserve Bank of Minneapolis.
- Mariacristina De Nardi & Eric French & John Bailey Jones, 2009.
"Why do the elderly save? the role of medical expenses,"
Working Paper Series
WP-09-02, Federal Reserve Bank of Chicago.
- Mariacristina De Nardi & Eric French & John B. Jones, 2010. "Why Do the Elderly Save? The Role of Medical Expenses," Journal of Political Economy, University of Chicago Press, vol. 118(1), pages 39-75, 02.
- Mariacristina De Nardi & Eric French & John Bailey Jones, 2009. "Why do the Elderly Save? The Role of Medical Expenses," NBER Working Papers 15149, National Bureau of Economic Research, Inc.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- The age-time-cohort problem and the identification of structural parameters in life-cylce models
by Christian Zimmermann in NEP-DGE blog on 2013-07-22 03:53:16
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