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A note on the estimation of intergenerational income correlations by the method of averaging

Abul Naga, Ramses H. (2001) A note on the estimation of intergenerational income correlations by the method of averaging. DARP (54). Suntory and Toyota International Centres for Economics and Related Disciplines, London, UK.

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Abstract

Averaging methods are routinely used in order to limit biases resulting from the mismeasurement of permanent incomes. The Solon/Zimmerman estimator regresses a single-year measurement of the child's resources on a T-period average of the parents' income while the Behrman/Taubman estimator regresses an S-period average of the child's resources on a T-period average of the parents' income. The latter estimator is shown to be the arithmetic mean of the S slope estimates arising from the Solon/Zimmerman methodology. However, because sampling variation produces yearly changes in the variance of children's incomes, it is shown that the Behrman/Taubman estimator is not efficient in the class of estimators which can be expressed as a weighted sum of the S distinct Solon/Zimmerman estimates. The minimum variance estimator in the above class is thus derived and applied to a US sample.

Item Type: Monograph (Discussion Paper)
Official URL: http://sticerd.lse.ac.uk
Additional Information: © 2001 Ramses Abul Naga
Divisions: STICERD
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HV Social pathology. Social and public welfare. Criminology
JEL classification: I - Health, Education, and Welfare > I3 - Welfare and Poverty
J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J62 - Job, Occupational, and Intergenerational Mobility
Sets: Collections > Economists Online
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Date Deposited: 07 Jul 2008 09:47
Last Modified: 23 Jun 2020 23:09
URI: http://eprints.lse.ac.uk/id/eprint/6562

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