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Distangling Age, Cohort and Time Effects in the Additive Model

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  • David McKenzie

Abstract

July 2002 This paper presents a new approach to the old problem of linear dependency of age, cohort and time effects. It is shown that second differences of the effects can be estimated without any normalization restrictions, providing information on the shape of the age, cohort and time effect profiles, and enabling identification of structural breaks. A Wald test is provided to test the popular linear and quadratic specifications against a very general alternative. First differenced and level effects can then be consistently estimated with a small number of additional normalizing assumptions. Moreover, it is demonstrated that coefficients on additional exogenous regressors can be consistently estimated in this framework without the need for normalizing assumptions. Working Papers Index

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Bibliographic Info

Paper provided by Stanford University, Department of Economics in its series Working Papers with number 02009.

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Date of creation: Jul 2002
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Handle: RePEc:wop:stanec:02009

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  1. Verbeek, M. & Nijman, T., 1992. "Minimum MSE Estimatin of a Regression Model with Fixed Effects from a Series of Cross Sections," Papers 9201, Tilburg - Center for Economic Research.
  2. Dolores Collado, M., 1997. "Estimating dynamic models from time series of independent cross-sections," Journal of Econometrics, Elsevier, vol. 82(1), pages 37-62.
  3. Hausman, Jerry A. & Taylor, William E., 1981. "Panel data and unobservable individual effects," Journal of Econometrics, Elsevier, vol. 16(1), pages 155-155, May.
  4. Jappelli, Tullio, 1995. "The Age-Wealth Profile and the Life-Cycle Hypothesis: A Cohort Analysis with a Time Series of Cross-Sections of Italian Households," CEPR Discussion Papers 1251, C.E.P.R. Discussion Papers.
  5. Angus Deaton & Christina Paxson, 1993. "Intertemporal Choice and Inequality," NBER Working Papers 4328, National Bureau of Economic Research, Inc.
  6. James Heckman & Edward Vytlacil, 2001. "Identifying The Role Of Cognitive Ability In Explaining The Level Of And Change In The Return To Schooling," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 1-12, February.
  7. David J. McKenzie, 2001. "The Household Response to the Mexican Peso Crisis," Working Papers 01017, Stanford University, Department of Economics.
  8. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
  9. Denton, Frank T & Mountain, Dean C & Spencer, Byron G, 1999. "Age, Trend, and Cohort Effects in a Macro Model of Canadian Expenditure Patterns," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(4), pages 430-43, October.
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Cited by:
  1. Johannes Geyer & Viktor Steiner, 2010. "Public Pensions, Changing Employment Patterns, and the Impact of Pension Reforms across Birth Cohorts: A Microsimulation Analysis for Germany," SOEPpapers on Multidisciplinary Panel Data Research 276, DIW Berlin, The German Socio-Economic Panel (SOEP).
  2. Laura Rossouw & Rulof Burger & Ronelle Burger, 2012. "The fertility transition in South Africa: A retrospective panel data analysis," Working Papers 03/2012, Stellenbosch University, Department of Economics, revised 2012.
  3. Van Landeghem, Bert, 2012. "A test for the convexity of human well-being over the life cycle: Longitudinal evidence from a 20-year panel," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 571-582.
  4. Gârleanu, Nicolae & Kogan, Leonid & Panageas, Stavros, 2012. "Displacement risk and asset returns," Journal of Financial Economics, Elsevier, vol. 105(3), pages 491-510.
  5. Nicolae Gârleanu & Leonid Kogan & Stavros Panageas, 2009. "The Demographics of Innovation and Asset Returns," NBER Working Papers 15457, National Bureau of Economic Research, Inc.
  6. Tilak Abeysinghe & Jiaying Gu, 2010. "The Cultural Revolution, Stress and Cancer," Microeconomics Working Papers 23118, East Asian Bureau of Economic Research.
  7. Nicolae Garleanu & Leonid Kogan & Stavros Panagaeas, 2009. "The Demographics of Innovation and Asset Returns," Working Papers 2009-008, Becker Friedman Institute for Research In Economics.
  8. Gregori Baetschmann, 2011. "Heterogeneity in the relationship between happiness and age: Evidence from the German Socio-Economic Panel," ECON - Working Papers 047, Department of Economics - University of Zurich.
  9. Coulson, N. Edward & McMillen, Daniel P., 2008. "Estimating time, age and vintage effects in housing prices," Journal of Housing Economics, Elsevier, vol. 17(2), pages 138-151, June.
  10. Sakai, Koji & Uesugi, Iichiro & Watanabe, Tsutomu, 2008. "Firm Age and the Evolution of Borrowing Costs: Evidence from Japanese Small Firms," PIE/CIS Discussion Paper 354, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  11. Gloria M. Rubio & Isidro Soloaga, 2004. "Assessing the Vulnerability of Agricultural Households to Macroeconomic Shocks: Evidence from Mexico," The Electronic Journal of Agricultural and Development Economics, Food and Agriculture Organization of the United Nations, vol. 1(1), pages 45-62.

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