Consequences of Specification Error for Distributional Analysis with an Application to Intergenerational Mobility

43 Pages Posted: 19 Dec 2001

See all articles by Donal O'Neill

Donal O'Neill

National University of Ireland, Maynooth (NUI Maynooth) - Department of Economics, Finance and Accounting; IZA Institute of Labor Economics

Olive Sweetman

National University of Ireland, Maynooth (NUI Maynooth) - Department of Economics, Finance and Accounting

Dirk Van de Gaer

Ghent University - Department of Social Economics

Abstract

In this paper we examine the properties of conditional distribution functions in the presence of several types of misspecification. We derive the properties of the cumulative conditional distribution function in the case of measurement error in the dependent variable, measurement error in the conditioning variables and omitted conditioning variables. Our focus on the conditional cumulative distribution is motivated by the fact that this distribution provides the natural starting point to investigate the direction and intensity of the effect of the variable a on the variable y. The results we present on measurement error have the character of dominance results: if the distribution of measurement error satisfies certain properties then we are able to sign the effect of specification error for a wide class of conditional CDF's. The effects are shown to depend on both the curvature of the true distribution and the properties of the error distribution. We illustrate our findings using a model of intergenerational mobility.

Keywords: Specification Error, Mobility, Conditional Distribution

JEL Classification: C14, J62

Suggested Citation

O'Neill, Donal and Sweetman, Olive and Van de Gaer, Dirk, Consequences of Specification Error for Distributional Analysis with an Application to Intergenerational Mobility. Available at SSRN: https://ssrn.com/abstract=294461 or http://dx.doi.org/10.2139/ssrn.294461

Donal O'Neill (Contact Author)

National University of Ireland, Maynooth (NUI Maynooth) - Department of Economics, Finance and Accounting ( email )

County Kildare
Ireland

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Olive Sweetman

National University of Ireland, Maynooth (NUI Maynooth) - Department of Economics, Finance and Accounting ( email )

County Kildare
Ireland

Dirk Van de Gaer

Ghent University - Department of Social Economics ( email )

Hoveniersberg 24
Gent, 9000
Belgium

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