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A Note on the Estimation of Intergenerational Income Correlations by the Method of Averaging

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  • Ramses H. ABUL NAGA

Abstract

Averaging methods are routinely used in order to limit biases resulting from the mismeasurement of permanent incomes. The Solon/Zimmerman estimator regresses a single-year measurement of the child's resources on a T-period average of the parents' income while the Behrman/Taubman estimator regresses an S-period average of the child's resources on a T-period average of the parents' income. The latter estimator is shown to be the arithmetic mean of the S slope estimates arising from the Solon/Zimmerman methodology. However, because sampling variation produces yearly changes in the variance of children's incomes, it is shown that the Behrman/Taubman estimator is not efficient in the class of estimators which can be expressed as a weighted sum of the S distinct Solon/Zimmerman estimates. The minimum variance estimator in the above class is thus derived and applied to a US sample.

Suggested Citation

  • Ramses H. ABUL NAGA, 2000. "A Note on the Estimation of Intergenerational Income Correlations by the Method of Averaging," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 00.14, Université de Lausanne, Faculté des HEC, DEEP.
  • Handle: RePEc:lau:crdeep:00.14
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    References listed on IDEAS

    as
    1. Behrman, Jere R & Taubman, Paul, 1990. "The Intergenerational Correlation between Children's Adult Earnings and Their Parents' Income: Result from the Michigan Panel Survey of Income Dynamics," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 36(2), pages 115-127, June.
    2. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
    3. Bowles, Samuel, 1972. "Schooling and Inequality from Generation to Generation," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages 219-251, Part II, .
    4. Zimmerman, David J, 1992. "Regression toward Mediocrity in Economic Stature," American Economic Review, American Economic Association, vol. 82(3), pages 409-429, June.
    5. Bjorklund, Anders & Jantti, Markus, 1997. "Intergenerational Income Mobility in Sweden Compared to the United States," American Economic Review, American Economic Association, vol. 87(5), pages 1009-1018, December.
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    More about this item

    Keywords

    intergenerational mobility ; measurement error; averaging methods; minimum variance estimation.;

    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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