Identifying heterogeneous income profiles using covariances of income levels and future growth rates

Autor:	Jeppe Druedahl, Anders Munk-Nielsen
Rok vydání:	2018
Předmět:	Estimation Economics and Econometrics Control and Optimization Applied Mathematics 05 social sciences Monte Carlo method Small sample Fixed effects model Covariance Component (UML) 0502 economics and business Econometrics Income level Economics Income growth 050207 economics 050205 econometrics
Zdroj:	Journal of Economic Dynamics and Control. 94:24-42
ISSN:	0165-1889
DOI:	10.1016/j.jedc.2018.07.003
Popis:	This paper shows that a central implication of heterogeneous income profiles (HIP) is that the covariance between the level of income and future income growth rates must become strongly positive from about age 40. Covariances of income levels and future growth rates therefore have strong identifying power for HIP. We show that adding such moments to an estimation can reverse seemingly strong evidence of HIP. We show this both in a small sample Monte Carlo study and using PSID data. Our results are robust to including a fixed effect correlated with the HIP component.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::a691aa08d68acb11f95b9dafa27e63ca https://doi.org/10.1016/j.jedc.2018.07.003 Zobrazit plný text záznamu Full Text from ScienceDirect