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On Synthetic Income Panels

Author

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  • Moreno, Héctor
  • Bourguignon, François
  • Dang, Hai-Anh

Abstract

In many developing countries, the increasing public interest in monitoring economic inequality and mobility is hindered by the scarce availability of longitudinal data. Synthetic panels based on matching individuals with the same time-invariant characteristics in consecutive cross-sections have been recently proposed as a substitute to such data. We extend the methodology to construct such synthetic panels in several directions by: a) explicitly assuming the unobserved or time variant determinants of (log) income are AR(1) and relying on pseudo-panel procedures to estimate the corresponding auto-regressive coefficient; b) abstracting from (log) normality assumptions; c) generating a close to perfect match of the terminal year income distribution and d) considering the whole income mobility matrix rather than mobility in and out of poverty. We exploit the cross-sectional dimension of a national-representative Mexican panel survey to evaluate the validity of this approach. With the median estimate of the AR coefficient, the income mobility matrix in the synthetic panel closely approximates that of the genuine matrix observed in the actual panel, except for out-lying values of the AR coefficient.

Suggested Citation

  • Moreno, Héctor & Bourguignon, François & Dang, Hai-Anh, 2021. "On Synthetic Income Panels," GLO Discussion Paper Series 809, Global Labor Organization (GLO).
  • Handle: RePEc:zbw:glodps:809
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    References listed on IDEAS

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    1. Hai‐Anh Dang & Dean Jolliffe & Calogero Carletto, 2019. "Data Gaps, Data Incomparability, And Data Imputation: A Review Of Poverty Measurement Methods For Data‐Scarce Environments," Journal of Economic Surveys, Wiley Blackwell, vol. 33(3), pages 757-797, July.
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    4. François Bourguignon, 2011. "Non-anonymous growth incidence curves, income mobility and social welfare dominance," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 9(4), pages 605-627, December.
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    More about this item

    Keywords

    Synthetic panel; income mobility; Mexico;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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