A nonparametric analysis of welfare and the economic shocks
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.
|Date of creation:||Oct 2006|
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- Richard Blundell & Ian Preston, 1997.
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IFS Working Papers
W97/15, Institute for Fiscal Studies.
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