Life Cycle Bias in the Estimation of Intergenerational Earnings Persistence
The estimation of intergenerational earnings mobility is rife with measurement problems since the research does not observe permanent, lifetime earnings. Nearly all studies make corrections for mean variation in earnings because of the age differences among respondents. Recent works employ average earnings or instrumental variable methods to address the effects of measurement error as a result of transitory earnings shocks and mis-reporting. However, empirical studies of intergenerational mobility have paid no attention to the changes in earnings variance across the life cycle suggested by economic models of human capital investment. Using information from the Intergenerational Income Data from Canada and the National Longitudinal Survey and Panel Study of Income Dynamics from the United States, this study finds a strong association between age at observation and estimated earnings persistence. Part of this age-dependence is related to a general increase in transitory earnings variance during the collection of data. An independent effect of life cycle investment is also identified. These findings are then applied to the variation among intergenerational earnings persistence studies. Among studies with similar methodologies, one-third of the variance in published estimates of earnings persistence is attributable to cross-study differences in the age of responding fathers. Finally, these results call into question tests for the importance of credit constraints based on measures of earnings at different points in the life cycle.
|Date of creation:||05 Aug 2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.statcan.gc.ca
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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 115-27, June.
- Zimmerman, David J, 1992. "Regression toward Mediocrity in Economic Stature," American Economic Review, American Economic Association, vol. 82(3), pages 409-29, June.
- Lorraine Dearden & Stephen Machin & H Reed, 1996.
"Intergenerational Mobility in Britain,"
CEP Discussion Papers
dp0281, Centre for Economic Performance, LSE.
- Jere R. Behrman & Alejandro Gaviria & Miguel Székely, 2001.
"Intergenerational Mobility in Latin America,"
JOURNAL OF LACEA ECONOMIA,
LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
- Jere R. Behrman & Alejandro Gaviria & Miguel Székely, 2001. "Intergenerational Mobility in Latin America," IDB Publications (Working Papers) 6485, Inter-American Development Bank.
- Jere R. Behrman & Alejandro Gaviria Uribe & Miguel Székely, 2001. "Intergenerational mobility in Latin America," INFORMES DE INVESTIGACIÓN 002914, FEDESARROLLO.
- Jere R. Behrman & Alejandro Gaviria & Miguel Székely, 2001. "Intergenerational Mobility in Latin America," Research Department Publications 4267, Inter-American Development Bank, Research Department.
- Heisz, Andrew & Corak, Miles, 1996. "The Intergenerational Income Mobility of Canadian Men," Analytical Studies Branch Research Paper Series 1996089e, Statistics Canada, Analytical Studies Branch.
- Gary S. Becker & Nigel Tomes, 1994.
"Human Capital and the Rise and Fall of Families,"
in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 257-298
National Bureau of Economic Research, Inc.
- Gary S. Becker & Nigel Tomes, . "Human Capital and the Rise and Fall of Families," University of Chicago - Population Research Center 84-10, Chicago - Population Research Center.
- Solon, Gary, 1999. "Intergenerational mobility in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 29, pages 1761-1800 Elsevier.
- Couch, Kenneth A. & Lillard, Dean R., 1998. "Sample selection rules and the intergenerational correlation of earnings," Labour Economics, Elsevier, vol. 5(3), pages 313-329, September.
- Shea, John, 2000.
"Does parents' money matter?,"
Journal of Public Economics,
Elsevier, vol. 77(2), pages 155-184, August.
- Solon, Gary, 1989. "Biases in the Estimation of Intergenerational Earnings Correlations," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 172-74, February.
- Neal, Derek & Rosen, Sherwin, 2000. "Theories of the distribution of earnings," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 7, pages 379-427 Elsevier.
- Kenneth A. Couch & Thomas A. Dunn, 1995.
"Intergenerational Correlations in Labor Market Status: A Comparison of the United States and Germany,"
Discussion Papers of DIW Berlin
111, DIW Berlin, German Institute for Economic Research.
- Kenneth A. Couch & Thomas A. Dunn, 1997. "Intergenerational Correlations in Labor Market Status: A Comparison of the United States and Germany," Journal of Human Resources, University of Wisconsin Press, vol. 32(1), pages 210-232.
- Peters, H Elizabeth, 1992. "Patterns of Intergenerational Mobility in Income and Earnings," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 456-66, August.
- Lillard, L.A. & Kilburn, M.R., 1995. "Intergenerational Earnings Links: Sons and Daughters," Papers 95-17, RAND - Labor and Population Program.
- Peter Gottschalk & Robert Moffitt, 1994. "The Growth of Earnings Instability in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 217-272.
- 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 1009-18, December.
- Moshe Buchinsky & Jennifer Hunt, 1999.
"Wage Mobility In The United States,"
The Review of Economics and Statistics,
MIT Press, vol. 81(3), pages 351-368, August.
- Behrman, Jere & Tarbman, Paul, 1985. "Intergenerational Earnings Mobility in the United States: Some Estimates and a Test of Becker's Intergenerational Endowments Model," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 144-51, February.
- Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352.
- Osterbacka, Eva, 2001. " Family Background and Economic Status in Finland," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(3), pages 467-84, September.
- Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
When requesting a correction, please mention this item's handle: RePEc:stc:stcp3e:2003207e. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Brown)
If references are entirely missing, you can add them using this form.