Advanced Search
MyIDEAS: Login to save this paper or follow this series

Estimating the Intergenerational Correlation of Incomes : An Errors in Variables Framework

Contents:

Author Info

  • Ramses H. ABUL NAGA

Abstract

Because the permanent incomes of parents and children are typically unobservable, the estimation of the intergenerational correlation of incomes is usually carried out via averaging methods or instrumentation. In this paper we take the permanent income of the parent family to be unobserved, but we assume that a model for its determinants is known to the researcher. In turn, this leads us to propose two related estimators for the intergenerational correlation: a two-stage least squares procedure and a more efficient MIMIC estimator. The MIMIC framework also provides estimates for the determinants of permanent income and the variance parameters required to evaluate the bias of the OLS estimator. Using a US sample of parents and children we provide estimates for the intergenerational correlation ranging between 0.30 and 0.78. The bias of the OLS estimator is estimated to be in the order of 40%.

Download Info

If 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.
File URL: http://www.hec.unil.ch/deep/textes/9812.pdf
Download Restriction: no

Bibliographic Info

Paper 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 9812.

as in new window
Length: 17 pages
Date of creation: Aug 1998
Date of revision:
Publication status: Published in Economica, vol. 69, No 273, Feb. 2002, pp. 69-92
Handle: RePEc:lau:crdeep:9812

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
Email:
Web page: http://www.hec.unil.ch/deep/publications/cahiers/series
More information through EDIRC

Related research

Keywords: intergenerational mobility; errors in variables;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
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.:
as in new window
  1. Zimmerman, David J, 1992. "Regression toward Mediocrity in Economic Stature," American Economic Review, American Economic Association, vol. 82(3), pages 409-29, June.
  2. Lorraine Dearden & Stephen Machin & H Reed, 1996. "Intergenerational Mobility in Britain," CEP Discussion Papers dp0281, Centre for Economic Performance, LSE.
  3. Behrman, Jere R & Taubman, Paul, 1990. "The Intergenerational Correlation between Children's Adult Earnings and Their Parents' Income: Result from the Michigan Panel Survey of Income Dynamics," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 36(2), pages 115-27, June.
  4. Gary S. Becker & Nigel Tomes, . "Human Capital and the Rise and Fall of Families," University of Chicago - Population Research Center 84-10, Chicago - Population Research Center.
  5. Solon, Gary, 1999. "Intergenerational mobility in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 29, pages 1761-1800 Elsevier.
  6. Behrman, J.R. & Pollak, R.A. & Taubman, P., 1990. "The Wealth Model: Efficiency In Education And Distribution In The Family," Discussion Papers in Economics at the University of Washington 90-16, Department of Economics at the University of Washington.
  7. Bjorklund, Anders & Jantti, Markus, 1997. "Intergenerational Income Mobility in Sweden Compared to the United States," American Economic Review, American Economic Association, vol. 87(5), pages 1009-18, December.
  8. Bowles, Samuel, 1972. "Schooling and Inequality from Generation to Generation," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages S219-S51, Part II, .
  9. Klepper, Steven & Leamer, Edward E, 1984. "Consistent Sets of Estimates for Regressions with Errors in All Variables," Econometrica, Econometric Society, vol. 52(1), pages 163-83, January.
  10. Song Han & Casey B. Mulligan, . "Human Capital, Heterogeneity, and the Estimation of Degrees of Intergenerational Mobility," University of Chicago - Population Research Center 97-3, Chicago - Population Research Center.
  11. Ramses ABUL NAGA & Jaya KRISHNAKUMAR, 1999. "Panel Data Estimation of the Intergenerational Correlation of Incomes," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9910, Université de Lausanne, Faculté des HEC, DEEP.
  12. Behrman, Jere R & Pollak, Robert A & Taubman, Paul, 1982. "Parental Preferences and Provision for Progeny," Journal of Political Economy, University of Chicago Press, vol. 90(1), pages 52-73, February.
  13. Casey B. Mulligan, 1999. "Galton versus the Human Capital Approach to Inheritance," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages S184-S224, December.
  14. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
  15. Willis, Robert J., 1987. "Wage determinants: A survey and reinterpretation of human capital earnings functions," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 10, pages 525-602 Elsevier.
  16. Solon, Gary, 1989. "Biases in the Estimation of Intergenerational Earnings Correlations," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 172-74, February.
  17. Griliches, Zvi, 1986. "Economic data issues," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 3, chapter 25, pages 1465-1514 Elsevier.
  18. Joseph G. Altonji & Thomas A. Dunn, 1991. "Relationships Among the Family Incomes and Labor Market Outcomes of Relatives," NBER Working Papers 3724, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Ramses Abul Naga, 2008. "Biases of the ordinary least squares and instrumental variables estimators of the intergenerational earnings elasticity: Revisited in the light of panel data," Journal of Economic Inequality, Springer, vol. 6(4), pages 323-350, December.
  2. Sari Pekkala & Robert E.B. Lucas, 2005. "On the Importance of Finnishing School: Half a Century of Inter-generational Economic Mobility in Finland," Discussion Papers 359, Government Institute for Economic Research Finland (VATT).
  3. Nilsson, William, 2005. "Opportunities, Preferences and Incomes," UmeÃ¥ Economic Studies 649, Umeå University, Department of Economics.
  4. Markus Jantti & Stephen P. Jenkins, 2014. "Income Mobility," Working Papers 319, ECINEQ, Society for the Study of Economic Inequality.
  5. Lindquist, Matthew J. & Böhlmark, Anders, 2005. "Life-Cycle Variations in the Association between Current and Lifetime Income: Country, Cohort and Gender Comparisons," Working Paper Series 4/2005, Swedish Institute for Social Research.
  6. Ramses H. ABUL NAGA, 2001. "Biases of the Ordinary Least Squares and Instrumental Variables Estimators of the Intergenerational Earnings Correlation : Revisited in the Light of Panel Data," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 01.05, Université de Lausanne, Faculté des HEC, DEEP.
  7. Donal O’Neill & Olive Sweetman & Dirk Van de gaer, 2007. "The effects of measurement error and omitted variables when using transition matrices to measure intergenerational mobility," Journal of Economic Inequality, Springer, vol. 5(2), pages 159-178, August.
  8. Ramses ABUL NAGA & Jaya KRISHNAKUMAR, 1999. "Panel Data Estimation of the Intergenerational Correlation of Incomes," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9910, Université de Lausanne, Faculté des HEC, DEEP.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:lau:crdeep:9812. See general 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: (Claudine Delapierre Saudan).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.