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Estimation and Inference for Actual and Counterfactual Growth Incidence Curves

Author

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  • Ferreira, Francisco H. G.

    () (World Bank)

  • Firpo, Sergio

    () (Insper, São Paulo)

  • Galvao, Antonio F.

    () (University of Iowa)

Abstract

Different episodes of economic growth display widely varying distributional characteristics, both across countries and over time. Growth is sometimes accompanied by rising and sometimes by falling inequality. Applied economists have come to rely on the Growth Incidence Curve, which gives the quantile-specific rate of income growth over a certain period, to describe and analyze the incidence of economic growth. This paper discusses the identification conditions, and develops estimation and inference procedures for both actual and counterfactual growth incidence curves, based on general functions of the quantile potential outcome process over the space of quantiles. The paper establishes the limiting null distribution of the test statistics of interest for those general functions, and proposes resampling methods to implement inference in practice. The proposed methods are illustrated by a comparison of the growth processes in the United States and Brazil during 1995-2007. Although growth in the average real wage was disappointing in both countries, the distribution of that growth was markedly different. In the United States, wage growth was mediocre for the bottom 80 percent of the sample, but much more rapid for the top 20 percent. In Brazil, conversely, wage growth was rapid below the median, and negative at the top. As a result, inequality rose in the United States and fell markedly in Brazil.

Suggested Citation

  • Ferreira, Francisco H. G. & Firpo, Sergio & Galvao, Antonio F., 2017. "Estimation and Inference for Actual and Counterfactual Growth Incidence Curves," IZA Discussion Papers 10473, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp10473
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    References listed on IDEAS

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    1. Alberto Abadie & Joshua Angrist & Guido Imbens, 2002. "Instrumental Variables Estimates of the Effect of Subsidized Training on the Quantiles of Trainee Earnings," Econometrica, Econometric Society, vol. 70(1), pages 91-117, January.
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    1. Estimation and Inference for Actual and Counterfactual Growth Incidence Curves
      by maximorossi in NEP-LTV blog on 2017-03-22 00:55:01

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    1. repec:eee:econom:v:206:y:2018:i:1:p:143-166 is not listed on IDEAS
    2. repec:eee:ecolet:v:162:y:2018:i:c:p:49-52 is not listed on IDEAS

    More about this item

    Keywords

    growth incidence curves; potential outcomes; inference; quantile process;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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