Empirical Strategies to Eliminate Life-Cycle Bias in the Intergenerational Elasticity of Earnings Literature
33 Pages Posted: 10 Jan 2011
There are 2 versions of this paper
Empirical Strategies to Eliminate Life-Cycle Bias in the Intergenerational Elasticity of Earnings Literature
Empirical Strategies to Eliminate Life-Cycle Bias in the Intergenerational Elasticity of Earnings Literature
Date Written: December 23, 2010
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: Suggested Citation
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