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The effects of measurement error and omitted variables when using transition matrices to measure intergenerational mobility

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  • O’NEILL, Donal
  • SWEETMAN, Olive
  • VAN DE GAER, Dirk

Abstract

This paper examines the consequences of specification error when transition matrices are used to analyse patterns of intergenerational mobility. We show that classical measurement error in both the child’s and parent’s earnings can lead to biased results, with summary mobility measures biased by as much as 20% in some cases. Furthermore our results suggest that the extent of the bias is most severe in the tails of the distribution. Omitted conditioning variables appear to have a modest effect on transition matrices in our model. Copyright Springer Science+Business Media, Inc. 2007
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  • O’NEILL, Donal & SWEETMAN, Olive & VAN DE GAER, Dirk, 2007. "The effects of measurement error and omitted variables when using transition matrices to measure intergenerational mobility," CORE Discussion Papers RP 1962, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvrp:1962 Note: In : Journal of Economic Inequal, 5, 159-178, 2007
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    File URL: http://dx.doi.org/10.1007/s10888-006-9035-7
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    1. Ramses H. ABUL NAGA, 1998. "Estimating the Intergenerational Correlation of Incomes : An Errors in Variables Framework," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9812, Université de Lausanne, Faculté des HEC, DEEP.
    2. Dearden, Lorraine & Machin, Stephen & Reed, Howard, 1997. "Intergenerational Mobility in Britain," Economic Journal, Royal Economic Society, vol. 107(440), pages 47-66, January.
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    Cited by:

    1. Jantti, Markus & Jenkins, Stephen P., 2013. "Income mobility," ISER Working Paper Series 2013-23, Institute for Social and Economic Research.
    2. Yonghong An & Wang Le & Ruli Xiao, 2015. "Your American Dream is Not Mine! A New Approach to Estimating Intergenerational Mobility Elasticities," Caepr Working Papers 2015-016 Classification-, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
    3. Miles Corak, 2017. "Divided Landscapes of Economic Opportunity: The Canadian Geography of Intergenerational Income Mobility," Working Papers 2017-043, Human Capital and Economic Opportunity Working Group.
    4. Black, Sandra E. & Devereux, Paul J., 2011. "Recent Developments in Intergenerational Mobility," Handbook of Labor Economics, Elsevier.
    5. Martin Nybom & Jan Stuhler, 2017. "Biases in Standard Measures of Intergenerational Income Dependence," Journal of Human Resources, University of Wisconsin Press, vol. 52(3), pages 800-825.
    6. Donal O’Neill & Olive Sweetman, 2013. "The consequences of measurement error when estimating the impact of obesity on income," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-20, December.
    7. Nicolas Pistolesi, 2009. "Inequality of opportunity in the land of opportunities, 1968–2001," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 7(4), pages 411-433, December.
    8. Robert Schoeni & Emily Wiemers, 2015. "The implications of selective attrition for estimates of intergenerational elasticity of family income," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(3), pages 351-372, September.
    9. O'Neill, Donal & Sweetman, Olive, 2012. "The Consequences of Measurement Error when Estimating the Impact of BMI on Labour Market Outcomes," IZA Discussion Papers 7008, Institute for the Study of Labor (IZA).
    10. Chen, Wen-Hao & Ostrovsky, Yuri & Piraino, Patrizio, 2017. "Lifecycle variation, errors-in-variables bias and nonlinearities in intergenerational income transmission: new evidence from Canada," Labour Economics, Elsevier, vol. 44(C), pages 1-12.
    11. Corak, Miles & Lindquist, Matthew J. & Mazumder, Bhashkar, 2014. "A comparison of upward and downward intergenerational mobility in Canada, Sweden and the United States," Labour Economics, Elsevier, vol. 30(C), pages 185-200.

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