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The Age-Time-Cohort Problem and the Identification of Structural Parameters in Life-Cycle Models

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  • Sam Schulhofer-Wohl

    (Federal Reserve Bank of Minneapolis)

Abstract

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.

Suggested Citation

  • Sam Schulhofer-Wohl, 2012. "The Age-Time-Cohort Problem and the Identification of Structural Parameters in Life-Cycle Models," 2012 Meeting Papers 575, Society for Economic Dynamics.
    • Handle: RePEc:red:sed012:575
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    References listed on IDEAS

    as
    1. 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, February.
    2. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769, October.
    3. 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.
    Full references (including those not matched with items on IDEAS)

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The age-time-cohort problem and the identification of structural parameters in life-cylce models
      by Christian Zimmermann in NEP-DGE blog on 2013-07-22 08:53:16

    Citations

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    Cited by:

    1. Luiz Mello & Simone Schotte & Erwin R. Tiongson & Hernan Winkler, 2017. "Greying the Budget: Ageing and Preferences over Public Policies," Kyklos, Wiley Blackwell, vol. 70(1), pages 70-96, February.
    2. Enrico Moretti & Daniel J. Wilson, 2017. "The Effect of State Taxes on the Geographical Location of Top Earners: Evidence from Star Scientists," American Economic Review, American Economic Association, vol. 107(7), pages 1858-1903, July.
    3. Jesse Rothstein, 2020. "The Lost Generation? Labor Market Outcomes for Post Great Recession Entrants," NBER Working Papers 27516, National Bureau of Economic Research, Inc.
    4. Hippolyte d'Albis & Ikpidi Badji, 2017. "Les inégalités de niveaux de vie entre les générations en France," Post-Print halshs-01524882, HAL.
    5. Hippolyte d’Albis & Ikpidi Badji, 2017. "Intergenerational inequalities in standards of living in France," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Études Économiques (INSEE), issue 491-492, pages 71-92.
    6. Jelnov, Pavel & Weiss, Yoram, 2020. "Influence in Economics and Aging," IZA Discussion Papers 12887, Institute of Labor Economics (IZA).
    7. Shutao Cao & Césaire Meh & José-Víctor Ríos-Rull & Yaz Terajima, 2018. "The Welfare Cost of Inflation Revisited: The Role of Financial Innovation and Household Heterogeneity," Staff Working Papers 18-40, Bank of Canada.
    8. Frank T Denton & Byron G Spencer & Terry A Yip, 2019. "Age-Income Dynamics Over The Life Course: Cohort Transition Patterns In Relative Income Based On Canadian Tax Returns," Department of Economics Working Papers 2019-02, McMaster University.
    9. Zoë Fannon & B. Nielsen, 2018. "Age-period cohort models," Economics Papers 2018-W04, Economics Group, Nuffield College, University of Oxford.
    10. G. C. Lim & Q. Zeng, 2016. "Consumption, Income, and Wealth: Evidence from Age, Cohort, and Period Elasticities," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(3), pages 489-508, September.
    11. Bardazzi, Rossella & Pazienza, Maria Grazia, 2018. "Ageing and private transport fuel expenditure: Do generations matter?," Energy Policy, Elsevier, vol. 117(C), pages 396-405.
    12. Lorenz Kueng & Mu-Jeung Yang & Bryan Hong, 2014. "Sources of Firm Life-Cycle Dynamics: Differentiating Size vs. Age Effects," NBER Working Papers 20621, National Bureau of Economic Research, Inc.
    13. Bardazzi, Rossella & Pazienza, Maria Grazia, 2017. "Switch off the light, please! Energy use, aging population and consumption habits," Energy Economics, Elsevier, vol. 65(C), pages 161-171.
    14. Päivi Kankaanranta, 2019. "A Cohort-Analysis of Age-Wealth Profile in Finland," Discussion Papers 130, Aboa Centre for Economics.

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    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J1 - Labor and Demographic Economics - - Demographic Economics

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