Evaluating Theories of Income Dynamics: A Probabilistic Approach
The paper proposes an approach to evaluate hypotheses about transition dynamics when only the distributions at two points in time are observed. Using principles of statistical mechanics, we show how to adjust in the "most probable" way a hypothesis such that it becomes compatible with the observed distributions. This adjustment procedure also allows to test hypotheses in a statistical sense. The test is based on the relative entropy and is equivalent to a likelihood ratio test. We apply our approach to compare the dynamics of the income distribution between men and women in the U.S. using PSID data.
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| Date of creation: | Jun 1999 |
| Handle: | RePEc:ube:dpvwib:dp9905 |
| Contact details of provider: | Postal: Schanzeneckstr. 1, PF 8573, CH-3001 Bern Phone: 0041 31 631 45 06 Fax: 41 31 631 37 83 Web page: http://www.vwi.unibe.ch/content/publikationen/index_eng.html More information through EDIRC
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References listed on IDEAS
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- Atkinson, A B, 1997.
"Bringing Income Distribution in from the Cold,"
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Royal Economic Society, vol. 107(441), pages 297-321, March.
- Atkinson, A-B, 1996. "Bringing Income Distribution in from the Cold," Economics Papers 117, Economics Group, Nuffield College, University of Oxford.
- Yuichi Kitamura & Michael Stutzer, 1997. "An Information-Theoretic Alternative to Generalized Method of Moments Estimation," Econometrica, Econometric Society, vol. 65(4), pages 861-874, July.
- Golan, Amos & Judge, George G. & Miller, Douglas, 1996. "Maximum Entropy Econometrics," Staff General Research Papers Archive 1488, Iowa State University, Department of Economics.
- Durlauf, Steven N. & Quah, Danny T., 1999. "The new empirics of economic growth," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 4, pages 235-308 Elsevier.
- Steven N. Durlauf & Danny T. Quah, 1998. "The New Empirics of Economic Growth," Working Papers 98-01-012, Santa Fe Institute.
- Durlauf,S.N. & Quah,D.T., 1998. "The new empirics of economic growth," Working papers 3, Wisconsin Madison - Social Systems.
- S Durlauf & Danny Quah, 1998. "The New Empirics of Economic Growth," CEP Discussion Papers dp0384, Centre for Economic Performance, LSE.
- Steven N. Durlauf & Danny T. Quah, 1998. "The New Empirics of Economic Growth," NBER Working Papers 6422, National Bureau of Economic Research, Inc.
- White, Halbert, 1982. "Maximum Likelihood Estimation of Misspecified Models," Econometrica, Econometric Society, vol. 50(1), pages 1-25, January.
- Schluter, Christian, 1998. "Statistical inference with mobility indices," Economics Letters, Elsevier, vol. 59(2), pages 157-162, May.
- Trede, Mark M., 1994. "Statistical inference in mobility measurement: Sex differences in earnings mobility," Discussion Papers in Econometrics and Statistics 4/94, University of Cologne, Institute of Econometrics and Statistics.
- Shorrocks, A F, 1978. "The Measurement of Mobility," Econometrica, Econometric Society, vol. 46(5), pages 1013-1024, September. Full references (including those not matched with items on IDEAS)
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