The Age-Time-Cohort Problem and the Identification of Structural Parameters in Life-Cycle Models
The standard approach to estimating structural parameters in life-cycle models imposes sufficient assumptions on the data to identify the "age profile" of outcomes, then chooses model parameters so that the model's age profile matches this empirical age profile. I show that the standard approach is both incorrect and unnecessary: incorrect, because it generically produces inconsistent estimators of the structural parameters, and unnecessary, because consistent estimators can be obtained under weaker fewer assumptions. I derive an identification method that avoids the problems of the standard approach and illustrate its benefits in a simple model of consumption inequality.
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- Mariacristina De Nardi & Eric French & John Bailey Jones, 2009.
"Why do the Elderly Save? The Role of Medical Expenses,"
NBER Working Papers
15149, National Bureau of Economic Research, Inc.
- Mariacristina De Nardi & Eric French & John B. Jones, 2010. "Why Do the Elderly Save? The Role of Medical Expenses," Journal of Political Economy, University of Chicago Press, vol. 118(1), pages 39-75, 02.
- Mariacristina De Nardi & Eric French & John Bailey Jones, 2009. "Why do the elderly save? the role of medical expenses," Working Paper Series WP-09-02, Federal Reserve Bank of Chicago.
- Sam Schulhofer-Wohl & Yang Yang, 2011. "Modeling the evolution of age and cohort effects in social research," Staff Report 461, Federal Reserve Bank of Minneapolis.
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