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Identifying an Earnings Process With Dependent Contemporaneous Income Shocks

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  • Dan Ben-Moshe

Abstract

This paper proposes a novel approach for identifying coefficients in an earnings dynamics model with arbitrarily dependent contemporaneous income shocks. Traditional methods relying on second moments fail to identify these coefficients, emphasizing the need for nongaussianity assumptions that capture information from higher moments. Our results contribute to the literature on earnings dynamics by allowing models of earnings to have, for example, the permanent income shock of a job change to be linked to the contemporaneous transitory income shock of a relocation bonus.

Suggested Citation

  • Dan Ben-Moshe, 2023. "Identifying an Earnings Process With Dependent Contemporaneous Income Shocks," Papers 2303.08460, arXiv.org, revised May 2023.
    • Handle: RePEc:arx:papers:2303.08460
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    References listed on IDEAS

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    1. Botosaru, Irene & Sasaki, Yuya, 2018. "Nonparametric heteroskedasticity in persistent panel processes: An application to earnings dynamics," Journal of Econometrics, Elsevier, vol. 203(2), pages 283-296.
    2. Fatih Guvenen & Fatih Karahan & Serdar Ozkan & Jae Song, 2021. "What Do Data on Millions of U.S. Workers Reveal About Lifecycle Earnings Dynamics?," Econometrica, Econometric Society, vol. 89(5), pages 2303-2339, September.
    3. Ben-Moshe, Dan, 2021. "Identification Of Linear Regressions With Errors In All Variables," Econometric Theory, Cambridge University Press, vol. 37(4), pages 633-663, August.
    4. Costas Meghir & Luigi Pistaferri, 2004. "Income Variance Dynamics and Heterogeneity," Econometrica, Econometric Society, vol. 72(1), pages 1-32, January.
    5. Ben-Moshe, Dan, 2018. "Identification Of Joint Distributions In Dependent Factor Models," Econometric Theory, Cambridge University Press, vol. 34(1), pages 134-165, February.
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    Cited by:

    1. Liu, Xin & Zhou, Chaobo & Li, Ying & Fang, Fei, 2025. "How economic stability shapes social relationship expenditures: Moderating effects of health and education," International Review of Economics & Finance, Elsevier, vol. 99(C).

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