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Empirical Strategies to Eliminate Life-Cycle Bias in the Intergenerational Elasticity of Earnings Literature

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  • Stuhler, Jan

    ()
    (University College London)

Abstract

I argue that the empirical strategies for estimation of the intergenerational elasticity of lifetime earnings that are currently employed in the literature might not eliminate bias arising from life-cycle effects. Specifically, I demonstrate that procedures based on the generalized errors-in-variables model suggested by Haider and Solon (2006) or the consideration of differential earnings growth rates across subpopulations may not yield unbiased or consistent estimates. I further argue that instrumental variable estimators will not identify an upper bound for the true population parameter.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5245.

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Length: 33 pages
Date of creation: Oct 2010
Date of revision:
Handle: RePEc:iza:izadps:dp5245

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Keywords: generalized errors-in-variables model; intergenerational mobility; intergenerational elasticity of earnings; life-cycle bias;

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References

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  1. María Cervini Plá, 2009. "Measuring intergenerational earnings mobility in Spain: A selection-bias-free," Working Papers wpdea0904, Department of Applied Economics at Universitat Autonoma of Barcelona.
  2. Björklund, Anders & Jäntti, Markus & Lindquist, Matthew J., 2009. "Family background and income during the rise of the welfare state: Brother correlations in income for Swedish men born 1932-1968," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 671-680, June.
  3. Nilsen, Øivind Anti & Vaage, Kjell & Aakvik, Arild & Jacobsen, Karl, 2008. "Estimates of Intergenerational Elasticities Based on Lifetime Earnings," IZA Discussion Papers 3709, Institute for the Study of Labor (IZA).
  4. Björklund, Anders & Lindahl, Mikael & Plug, Erik, 2005. "The Origins of Intergenerational Associations: Lessons from Swedish Adoption Data," IZA Discussion Papers 1739, Institute for the Study of Labor (IZA).
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Cited by:
  1. Manudeep Bhuller & Magne Mogstad & Kjell G.Salvanes, 2011. "Life-cycle bias and the returns to schooling in current and lifetime earnings," Discussion Papers 666, Research Department of Statistics Norway.
  2. Nybom, Martin & Stuhler, Jan, 2011. "Heterogeneous Income Profiles and Life-Cycle Bias in Intergenerational Mobility Estimation," IZA Discussion Papers 5697, Institute for the Study of Labor (IZA).

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