Estimating Continuous-Time Income Models
A fundamental component of inter-temporal consumption-saving and portfolio allocation models is a statistical model of the income process. While income processes are commonly unobservable income flows which evolve in continuous time, observable income data are usually discrete, having been aggregated over time. We consider continuous-time earning processes, specifically non-linearly transformed Ornstein-Uhlenbeck processes, and the associated integrated, i.e. time aggregated process. Both processes are characterized, and we show that time aggregation alters important statistical properties. The parameters of the earning process are estimable by GMM, and the finite sample properties of the estimator are investigated. Our methods are applied to annual earnings data for the US. It is demonstrated that the model replicates well important features of the earnings distribution.
|Date of creation:||Jan 2011|
|Contact details of provider:|| Postal: Am Stadtgraben 9, 48143 Münster, Germany|
Web page: https://www.wiwi.uni-muenster.de/cqe/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:cqe:wpaper:1811. 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: (Susanne Deckwitz)
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.