IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Life-cycle variations in the association between current and lifetime earnings: Evidence for German natives and guest workers

  • Brenner, Jan

In many economic models a central variable of interest is lifetime or permanent income which is not observed in survey data sets and typically proxied by annual income information. To assess the quality of such approximations, we use a unique source of lifetime earnings -- the German pension system -- and focus on two important issues that have been largely ignored in the existing literature. The first is how to deal with zero income observations in the analysis of women. The second is whether these approximations differ between natives and guest workers. For female earners, we find that estimates of the associations between current and lifetime income are highly sensitive to the treatment of zero earnings. The reason turns out to be the highly cyclical nature of the labor supply behavior of mothers. Furthermore, immigrants' income proxies are prone to significantly larger attenuation biases over the entire life-cycle. This result is explained by the larger share of annual income variance attributable to the transitory income component for immigrants. Averaging income over up to 15Â years alleviates the attenuation bias as well as the difference in biases between natives and guest workers.

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:
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 17 (2010)
Issue (Month): 2 (April)
Pages: 392-406

in new window

Handle: RePEc:eee:labeco:v:17:y:2010:i:2:p:392-406
Contact details of provider: Web page:

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. Amelie Constant & Douglas S. Massey, 2003. "Self-selection, earnings, and out-migration: A longitudinal study of immigrants to Germany," Journal of Population Economics, Springer, vol. 16(4), pages 631-653, November.
  2. Christopher D. Carroll & Lawrence H. Summers, 1991. "Consumption Growth Parallels Income Growth: Some New Evidence," NBER Chapters, in: National Saving and Economic Performance, pages 305-348 National Bureau of Economic Research, Inc.
  3. Michael Baker & Gary Solon, 1999. "Earnings Dynamics and Inequality among Canadian Men, 1976-1992: Evidence from Longitudinal Income Tax Records," NBER Working Papers 7370, National Bureau of Economic Research, Inc.
  4. Bhashkar Mazumder, 2005. "Fortunate Sons: New Estimates of Intergenerational Mobility in the United States Using Social Security Earnings Data," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 235-255, May.
  5. Borjas, George J, 1992. "Ethnic Capital and Intergenerational Mobility," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 123-50, February.
  6. Dustmann, Christian, 2003. "Return migration, wage differentials, and the optimal migration duration," European Economic Review, Elsevier, vol. 47(2), pages 353-369, April.
  7. Constant, Amelie F. & Zimmermann, Klaus F., 2005. "Legal Status at Entry, Economic Performance, and Self-employment Proclivity: A Bi-national Study of Immigrants," IZA Discussion Papers 1910, Institute for the Study of Labor (IZA).
  8. Chiswick, Barry R, 1978. "The Effect of Americanization on the Earnings of Foreign-born Men," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 897-921, October.
  9. Jan M. Hoem, 2005. "Why does Sweden have such high fertility?," MPIDR Working Papers WP-2005-009, Max Planck Institute for Demographic Research, Rostock, Germany.
  10. Klaus F. Zimmermann & Amelie F. Constant & Liliya Gataullina, 2009. "Naturalization proclivities, ethnicity and integration," International Journal of Manpower, Emerald Group Publishing, vol. 30(1/2), pages 70-82, May.
  11. Arne Uhlendorff & Klaus F. Zimmermann, 2014. "Unemployment Dynamics among Migrants and Natives," Economica, London School of Economics and Political Science, vol. 81(322), pages 348-367, 04.
  12. 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.
  13. Borjas, George J, 1994. "Immigrant Skills and Ethnic Spillovers," Journal of Population Economics, Springer, vol. 7(2), pages 99-118.
  14. Jan M. Hoem, 2005. "Why does Sweden have such high fertility?," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 13(22), pages 559-572, November.
  15. Sinning, Mathias, 2006. "Home-ownership and Economic Performance of Immigrants in Germany," RWI Discussion Papers 45, Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI).
  16. Mathias Sinning, 2006. "Home-ownership and Economic Performance of Immigrants in Germany," RWI Discussion Papers 0045, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
  17. 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.
  18. Steven Haider & Gary Solon, 2006. "Life-Cycle Variation in the Association between Current and Lifetime Earnings," American Economic Review, American Economic Association, vol. 96(4), pages 1308-1320, September.
  19. Bhashkar Mazumder, 2001. "The mis-measurement of permanent earnings: new evidence from Social Security earnings data," Working Paper Series WP-01-24, Federal Reserve Bank of Chicago.
  20. Anders Bohlmark & Matthew J. Lindquist, 2006. "Life-Cycle Variations in the Association between Current and Lifetime Income: Replication and Extension for Sweden," Journal of Labor Economics, University of Chicago Press, vol. 24(4), pages 879-900, October.
  21. Grawe, Nathan D., 2006. "Lifecycle bias in estimates of intergenerational earnings persistence," Labour Economics, Elsevier, vol. 13(5), pages 551-570, October.
Full references (including those not matched with items on IDEAS)

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

When requesting a correction, please mention this item's handle: RePEc:eee:labeco:v:17:y:2010:i:2:p:392-406. 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: (Zhang, Lei)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.