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Identification of the Covariance Structure of Earnings using the GMM Estimator

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  • Aedin Doris

    ()
    (Economics,Finance and Accounting National University of Ireland, Maynooth)

  • Donal O'Neill

    ()
    (Economics,Finance and Accounting National University of Ireland,)

  • Olive Sweetman

    ()
    (Economics,Finance and Accounting National University of Ireland,)

Abstract

In this paper we study the performance of the GMM estimator in the context of the covariance structure of earnings. Using analytical and Monte Carlo techniques we examine the sensitivity of parameter identification to key features such as panel length, sample size, the degree of persistence of earnings shocks and the evolution of inequality over time. We show that the interaction of transitory persistence with the time pattern of inequality determines identification in these models and offer some practical recommendations that follow from our findings.

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Bibliographic Info

Paper provided by Department of Economics, Finance and Accounting, National University of Ireland - Maynooth in its series Economics, Finance and Accounting Department Working Paper Series with number n208-10.pdf.

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Length: 30 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:may:mayecw:n208-10.pdf

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  1. Aedin Doris & Donal O’Neill & Olive Sweetman, 2008. "Does Growth Affect the Nature of Inequality? Ireland 1994-2001," Economics, Finance and Accounting Department Working Paper Series n1930708.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
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  12. Aedin Doris & Donal O'Neill & Olive Sweetman, 2010. "Aggregate Earnings Inequality in Europe: Permanent Differences or Transitory Fluctuations?," Economics, Finance and Accounting Department Working Paper Series n211-10.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
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  17. Aedın Doris & Donal O’Neill & Olive Sweetman, 2011. "GMM estimation of the covariance structure of longitudinal data on earnings," Stata Journal, StataCorp LP, vol. 11(3), pages 439-459, September.
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Citations

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Cited by:
  1. Markus Jantti & Stephen P. Jenkins, 2014. "Income Mobility," Working Papers 319, ECINEQ, Society for the Study of Economic Inequality.
  2. Stephen Jenkins & Peter Lambert, 2011. "Robert Moffitt and Peter Gottschalk’s 1995 paper ‘Trends in the covariance structure of earnings in the US: 1969–1987’," Journal of Economic Inequality, Springer, vol. 9(3), pages 433-437, September.
  3. Kässi, Otto, 2011. "Earnings Dynamics of Men and Women in Finland: Permanent Inequality versus Earnings Instability," MPRA Paper 34301, University Library of Munich, Germany.
  4. repec:ese:iserwp:2013-10 is not listed on IDEAS
  5. Cappellari, Lorenzo & Jenkins, Stephen P., 2013. "Earnings and Labour Market Volatility in Britain," IZA Discussion Papers 7491, Institute for the Study of Labor (IZA).
  6. SOLOGON Denisa & VAN KERM Philippe, 2014. "Earnings dynamics, foreign workers and the stability of inequality trends in Luxembourg 1988-2009," CEPS/INSTEAD Working Paper Series 2014-03, CEPS/INSTEAD.

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