Prediction and Determination of Household Permanent Income
AbstractThis paper is about the determination and prediction of permanent income in household data. Standard static welfare indicators (e.g. per capita expenditure and income) are imperfect in this respect as they typically contain a high transitory component. The framework we employ is consistent with the permanent income hypothesis but is supplemented with a causes equation where unobservable permanent income is explicitly modelled as a function of causal variables which play a key part in its determination. Simultaneous estimation of the model allows us to compare how well different standard static welfare indicators identify permanent income but more importantly enables us to predict permanent income using information contained both in the causal variables and in the standard static welfare indicators. The paper is closed by an application of the methodology to household data from the rural sectors of two Chinese provinces.
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Bibliographic InfoPaper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 9705.
Length: 28 pages
Date of creation: Aug 1997
Date of revision:
Contact details of provider:
Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
Phone: ++41 21 692.33.64
Fax: ++41 21 692.33.05
Web page: http://www.hec.unil.ch/deep/publications/cahiers/series
More information through EDIRC
Permanent income; prediction; determination; living standards; rural China;
Other versions of this item:
- Ramses H. Abul Naga & Robin Burgess, 1997. "Prediction and Determination of Household Permanent Income," STICERD - Distributional Analysis Research Programme Papers 32, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Ramses H. Abul Naga & Robin Burgess, 1997. "Prediction and determination of household permanent income," LSE Research Online Documents on Economics 2143, London School of Economics and Political Science, LSE Library.
- I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
- C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
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