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Estimating flexible income processes from subjective expectations data: Evidence from India and Colombia

Author

Listed:
  • Manuel Arellano

    (CEMFI)

  • Orazio Attanasio

    (Yale University and NBER)

  • Sam Crossman

    (UK Government Economic Service)

  • V’ctor Sancibri‡n

    (Bocconi University and IGIER)

Abstract

We develop a methodology for modeling household income processes when subjective probabilistic assessments of future income are available. This allows us to flexibly estimate conditional cdfs directly using elicited individual subjective probabilities\, and to obtain empirical measurements of subjective risk and subjective persistence. We then use two longitudinal surveys collected in rural India and rural Colombia to explore the nature of perceived income dynamics in those contexts. Our results suggest linear income processes are rejected in favor of more flexible versions in both cases; subjective income distributions feature heteroskedasticity\, conditional skewness and nonlinear persistence.

Suggested Citation

  • Manuel Arellano & Orazio Attanasio & Sam Crossman & V’ctor Sancibri‡n, 2025. "Estimating flexible income processes from subjective expectations data: Evidence from India and Colombia," Cowles Foundation Discussion Papers 2478, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:2478
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    File URL: https://cowles.yale.edu/sites/default/files/2025-12/d2478.pdf
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