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Estimating Flexible Income Processes from Subjective Expectations Data: Evidence from India and Colombia

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Listed:
  • Manuel Arellano
  • Orazio Attanasio
  • Samuel Crossman
  • Víctor Sancibrián

Abstract

We develop a methodology for modeling household income processes when subjective probabilistic assessments of future income are available. This allows us to flexibly estimate conditional cdfs directly using elicited individual subjective probabilities, and to obtain empirical measurements of subjective risk and persistence. We then use two longitudinal surveys collected in rural India and rural Colombia to explore the nature of income dynamics in those contexts. Our results suggest linear income processes are rejected in favor of more flexible versions in both cases; subjective income distributions feature heteroskedasticity, conditional skewness and nonlinear persistence.

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  • Manuel Arellano & Orazio Attanasio & Samuel Crossman & Víctor Sancibrián, 2024. "Estimating Flexible Income Processes from Subjective Expectations Data: Evidence from India and Colombia," NBER Working Papers 32922, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32922
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    References listed on IDEAS

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    1. Manuel Arellano & Stéphane Bonhomme, 2012. "Identifying Distributional Characteristics in Random Coefficients Panel Data Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(3), pages 987-1020.
    2. Hu, Yingyao, 2017. "The econometrics of unobservables: Applications of measurement error models in empirical industrial organization and labor economics," Journal of Econometrics, Elsevier, vol. 200(2), pages 154-168.
    3. Delavande, Adeline & Giné, Xavier & McKenzie, David, 2011. "Measuring subjective expectations in developing countries: A critical review and new evidence," Journal of Development Economics, Elsevier, vol. 94(2), pages 151-163, March.
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    More about this item

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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