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Small-sample bias in synthetic cohort models of labor supply

  • Paul J. Devereux

    (School of Economics and Geary Institute, University College Dublin, Ireland)

This paper investigates small-sample biases in synthetic cohort models (repeated cross-sectional data grouped at the cohort and year level) in the context of a female labor supply model. I use the Current Population Survey to compare estimates when group sizes are extremely large to those that arise from randomly drawing subsamples of observations from the large groups. I augment this approach with Monte Carlo analysis so as to precisely quantify biases and coverage rates. In this particular application, thousands of observations per group are required before small-sample issues can be ignored in estimation and sampling error leads to large downward biases in the estimated income elasticity. Copyright © 2007 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/jae.938
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File URL: http://qed.econ.queensu.ca:80/jae/2007-v22.4/
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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 22 (2007)
Issue (Month): 4 ()
Pages: 839-848

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Handle: RePEc:jae:japmet:v:22:y:2007:i:4:p:839-848
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  11. Paul J. Devereux, 2006. "Small sample bias in synthetic cohort models of labor supply," Working Papers 200606, School of Economics, University College Dublin.
  12. Moffitt, Robert, 1993. "Identification and estimation of dynamic models with a time series of repeated cross-sections," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 99-123, September.
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  17. Nijman, T.E. & Verbeek, M.J.C.M., 1993. "Minimum MSE estimation of a regression model with fixed effects from a series of cross sections," Other publications TiSEM 34c1104a-a64b-4030-be99-b, Tilburg University, School of Economics and Management.
  18. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
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