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Heterogeneous Income Profiles and Lifecycle Bias in Intergenerational Mobility Estimation

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  • Martin Nybom
  • Jan Stuhler

Abstract

Using short snapshots of income in intergenerational mobility estimation causes “lifecycle bias†if the snapshots cannot mimic lifetime outcomes. We use uniquely long series of Swedish income data to show that this bias is large and to examine current strategies to reduce it. We confirm that lifecycle bias is smallest when incomes are measured around midlife, a central implication from a widely adopted generalization of the classical errors-in-variables model. However, the model cannot predict the ideal age of measurement or eliminate lifecycle bias at other ages. We illustrate how extensions of this model can reduce the bias further.

Suggested Citation

  • Martin Nybom & Jan Stuhler, 2016. "Heterogeneous Income Profiles and Lifecycle Bias in Intergenerational Mobility Estimation," Journal of Human Resources, University of Wisconsin Press, vol. 51(1), pages 239-268.
  • Handle: RePEc:uwp:jhriss:v:51:y:2016:i:1:p:239-268
    Note: DOI: 10.3368/jhr.51.1.239
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    More about this item

    JEL classification:

    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • D3 - Microeconomics - - Distribution
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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