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A nonparametric analysis of welfare and the economic shocks

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  • Nicoletta Rosati

    (Institute for Fiscal Studies)

Abstract

The behaviour of the permanent and transitory economic shocks for different levels of households' welfare is studied using both consumption and income measures. After testing for heteroskedasticity of the economic shocks, we use local polynomial regression models to estimate the variance of the shocks conditional on welfare level. Italian data covering the period 1980-2004 show evidence of heteroskedasticity of both the transitory and the permanent economic shocks, with the poor experiencing higher variances. The permanent shocks seem to have a more uniform effect at all welfare levels.

Suggested Citation

  • Nicoletta Rosati, 2006. "A nonparametric analysis of welfare and the economic shocks," CeMMAP working papers CWP22/06, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:cemmap:22/06
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    File URL: http://cemmap.ifs.org.uk/wps/cwp2206.pdf
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    References listed on IDEAS

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    3. Richard Blundell & Ian Preston, 1998. "Consumption Inequality and Income Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 603-640.
    4. Deaton, Angus & Paxson, Christina, 1994. "Intertemporal Choice and Inequality," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 437-467, June.
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