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On synthetic income panels

Author

Listed:
  • François Bourguignon

    () (PSE - Paris School of Economics)

  • A. Hector Moreno M.

    (University of Oxford [Oxford])

Abstract

In many developing countries, the increasing public interest for economic inequality and mobility runs into the scarce availability of longitudinal data. Synthetic panels based on matching individuals with the same time-invariant characteristics in consecutive cross-sections have been proposed as a substitute to such data - see Dang and Lanjouw (2014). The present paper improves on the calibration methodology of such synthetic panels in several directions by: a) explicitly assuming the unobserved or time variant determinants of (log) income are AR(1) and relying on pseudo-panel procedures to estimate the corresponding auto-regressive coefficient; b) abstracting from (log) normality assumptions; c) generating a close to perfect match of the terminal year income distribution and d) considering the whole mobility matrix rather than mobility in and out of poverty. We exploit the cross-sectional dimension of a national-representative Mexican panel survey to evaluate the validity of this approach. With the median estimate of the AR coefficient, the income mobility matrix in the synthetic panel turns out to be close to the genuine matrix observed in the panel. However, this need not be true for extreme values of the AR coefficient in the confidence interval of its estimation.

Suggested Citation

  • François Bourguignon & A. Hector Moreno M., 2020. "On synthetic income panels," Working Papers halshs-01988068, HAL.
  • Handle: RePEc:hal:wpaper:halshs-01988068
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01988068v2
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    References listed on IDEAS

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    1. Dang,Hai-Anh H. & Lanjouw,Peter F., 2013. "Measuring poverty dynamics with synthetic panels based on cross-sections," Policy Research Working Paper Series 6504, The World Bank.
    2. Francisco H.G. Ferreira & Julian Messina & Jamele Rigolini & Luis-Felipe López-Calva & Maria Ana Lugo & Renos Vakis, 2013. "Economic Mobility and the Rise of the Latin American Middle Class [La movilidad económica y el crecimiento de la clase media en América Latina]," World Bank Publications, The World Bank, number 11858, June.
    3. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
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    Keywords

    Synthetic panel; income mobility; Mexico;

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