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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 School of Economics and Political Science, 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
Library of Congress subject classification: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HV Social pathology. Social and public welfare. Criminology
Journal of Economic Literature Classification System: 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)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 54
Date Deposited: 07 Jul 2008 09:47
URL: http://eprints.lse.ac.uk/6562/

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