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A nonparametric analysis of welfare and the economic shocks


  • Nicoletta Rosati

    (Institute for Fiscal Studies)


The behaviour of the permanent and transitory economic shocks for different levels of households' welfare is studied using both consumption and income measures. After testing for heteroskedasticity of the economic shocks, we use local polynomial regression models to estimate the variance of the shocks conditional on welfare level. Italian data covering the period 1980-2004 show evidence of heteroskedasticity of both the transitory and the permanent economic shocks, with the poor experiencing higher variances. The permanent shocks seem to have a more uniform effect at all welfare levels.

Suggested Citation

  • Nicoletta Rosati, 2006. "A nonparametric analysis of welfare and the economic shocks," CeMMAP working papers CWP22/06, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:cemmap:22/06

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    References listed on IDEAS

    1. Abul Naga, Ramses H. & Burgess, Robin, 1997. "Prediction and determination of household permanent income," LSE Research Online Documents on Economics 2143, London School of Economics and Political Science, LSE Library.
    2. Richard Blundell & Ian Preston, 1998. "Consumption Inequality and Income Uncertainty," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 603-640.
    3. Deaton, Angus & Paxson, Christina, 1994. "Intertemporal Choice and Inequality," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 437-467, June.
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    Heteroskedasticity; income and consumption welfare measures; local polynomial regression; permanent and transitory shocks;

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