Empirical Strategies to Eliminate Life-Cycle Bias in the Intergenerational Elasticity of Earnings Literature

33 Pages Posted: 25 Oct 2010

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Abstract

I argue that the empirical strategies for estimation of the intergenerational elasticity of lifetime earnings that are currently employed in the literature might not eliminate bias arising from life-cycle effects. Specifically, I demonstrate that procedures based on the generalized errors-in-variables model suggested by Haider and Solon (2006) or the consideration of differential earnings growth rates across subpopulations may not yield unbiased or consistent estimates. I further argue that instrumental variable estimators will not identify an upper bound for the true population parameter.

Keywords: intergenerational mobility, intergenerational elasticity of earnings, life-cycle bias, generalized errors-in-variables model

JEL Classification: J62, C23

Suggested Citation

Stuhler, Jan, Empirical Strategies to Eliminate Life-Cycle Bias in the Intergenerational Elasticity of Earnings Literature. IZA Discussion Paper No. 5245, Available at SSRN: https://ssrn.com/abstract=1696848 or http://dx.doi.org/10.2139/ssrn.1696848

Jan Stuhler (Contact Author)

University College London ( email )

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