Lifecycle bias in estimates of intergenerational earnings persistence

This paper identifies a significant negative relationship between estimated intergenerational earnings persistence and the age at which fathers are observed. In total, the estimation methodology and the age of the father at observation account for 40 percent of the variation among existing studies. The paper explores two possible causes of this pattern: increasing attenuation bias resulting from growing transitory earnings variance and a lifecycle bias which follows from the rise in permanent earnings variance over the lifecycle. Evidence presented favors the latter explanation over the former. The paper also considers both formal and informal approaches to mitigating the lifecycle bias.     

Stochastic monotonicity in intergenerational mobility tables

The aim of this paper is to test for stochastic monotonicity in intergenerational socio‐economic mobility tables. In other words, we question whether having a parent from a high socio‐economic status is never worse than having one with a lower status. Using existing inferential procedures for testing unconditional stochastic monotonicity, we first test a set of 149 intergenerational mobility tables in 35 different countries and find that monotonicity cannot be rejected in hardly any table. In addition, we propose new testing procedures for testing conditional stochastic monotonicity and investigate whether monotonicity still holds after conditioning on a number of covariates such as education, cognitive and non‐cognitive skills. Based on the NCDS cohort data from the UK, our results provide evidence that monotonicity holds, even conditionally. Moreover, we do not find large differences in our results when comparing social class and wage class mobility. Copyright © 2010 John Wiley & Sons, Ltd.     

Reapplication and extension: intergenerational mobility in the United States

This paper replicates and extends Solon's [Am. Econ. Rev. 82 (1992) 393–408.] article “Intergenerational Income Mobility in the United States ”. The results confirm previous findings about the degree of transmission in earnings and consumption from fathers to sons. The correlation between fathers' and sons' earnings lies in the neighborhood of 0.4 and the correlation in consumption is larger. Using the sons' outcomes when they are 5 years older does not alter the estimates of the correlation in earnings, but the estimates of the correlation in consumption are smaller and closer to the estimates of the correlation in earnings. The estimates that use consumption data are sensitive to whether sons' 1984 or 1989 outcomes are used and to whether one adjusts for family size and structure.     

Model selection for hazard rate estimation in presence of censoring

This note presents an estimator of the hazard rate function based on right censored data. A collection of estimators is built from a regression-type contrast, in a general collection of linear models. Then, a penalised model selection procedure provides an estimator which satisfies an oracle inequality. In particular, we can prove that it is adaptive in the minimax sense on Hölder spaces.     

On generalized progressive hybrid censoring in presence of competing risks

The progressive Type-II hybrid censoring scheme introduced by Kundu and Joarder (Comput Stat Data Anal 50:2509–2528, 2006), has received some attention in the last few years. One major drawback of this censoring scheme is that very few observations (even no observation at all) may be observed at the end of the experiment. To overcome this problem, Cho et al. (Stat Methodol 23:18–34, 2015) recently introduced generalized progressive censoring which ensures to get a pre specified number of failures. In this paper we analyze generalized progressive censored data in presence of competing risks. For brevity we have considered only two competing causes of failures, and it is assumed that the lifetime of the competing causes follow one parameter exponential distributions with different scale parameters. We obtain the maximum likelihood estimators of the unknown parameters and also provide their exact distributions. Based on the exact distributions of the maximum likelihood estimators exact confidence intervals can be obtained. Asymptotic and bootstrap confidence intervals are also provided for comparison purposes. We further consider the Bayesian analysis of the unknown parameters under a very flexible beta–gamma prior. We provide the Bayes estimates and the associated credible intervals of the unknown parameters based on the above priors. We present extensive simulation results to see the effectiveness of the proposed method and finally one real data set is analyzed for illustrative purpose.     

Estimating the intergenerational persistence of lifetime earnings with life course matching: Evidence from the PSID

Why do estimates of the intergenerational persistence in earnings vary so much for the United States? Recent research suggests that lifecycle bias may be a major factor [Grawe, N., Lifecycle bias in estimates of intergenerational earnings persistence. Labour Economics 2006, 13:551–570; Haider, S., and Solon, G., Life-cycle variation in the association between current and lifetime earnings. American Economic Review 2006, 96(4):1308–1320.]. In this paper we estimate the intergenerational correlation in lifetime earnings by using sons' and fathers' earnings at similar ages in order to account for lifecycle bias. Our estimate based on earnings measured at 35–44 for both fathers and sons is similar to that for the age range 45–54.     

Optimal property taxation in the presence of interregional capital mobility

A single region's optimal property tax policy is examined in a model with interregional capital mobility. In this model, property taxation is used to finance local public expenditures. Different tax rates may be imposed on property used to produce goods which are traded between regions and property used to produce nontraded goods (e.g., residential property). The key determinants of the difference between the optimal tax rates are identified, and it is argued that there exists a bias towards relatively low tax rates on property used to produce traded goods. The role of labor mobility is also investigated.     

An alternative measure of intergenerational income mobility based on a random coefficient model

We propose an alternative measure of the degree to which income status is transmitted from one generation to another. Our indicator of intergenerational income mobility is based on a random coefficient model, which allows for variation in intergenerational mobility across families due to multiplicative unobserved family‐specific characteristics. This alternative measure suggests that intergenerational income persistence is typically stronger than when intergenerational income mobility is measured using the standard elasticity of sons' income with respect to fathers' income. Copyright © 2011 John Wiley & Sons, Ltd.     

The age profile of mobility measures: an application to earnings in West Germany

This paper develops a technique for estimating age-profiles of earnings mobility using conditional kernel density estimation and establishes their statistical properties. Both pointwise and simultaneous confidence intervals are derived. The paper then examines the age-profile of short-run earnings mobility in Germany between 1983 and 1993 using the Socio-Economic Panel data. It turns out that earnings mobility is significantly higher for young people than for elder ones. Mobility declines rather rapidly until the age of thirty-five or so and remains constant thereafter. The shape of the profile does not change significantly during the observation period. © 1998 John Wiley & Sons, Ltd.     

Immigrant earnings profiles in the presence of human capital investment: Measuring cohort and macro effects

We argue that when immigrant earnings are considered in the context of post-arrival human capital investment: cohort quality should be defined in terms of the present value of the whole earnings profile; and, an appropriate definition of “macro” effects is obtained using the earnings profile of the native born cohort entering the labor market at the same time as an immigrant cohort. We illustrate this by using Canadian immigrant earnings, where there were large cross-cohort earnings declines in the 1980s, 1990s and early 2000s. We find that changes affecting all new entrants play an important role in understanding immigrant earnings. In contrast, earlier approaches imply that “macro” events explain little of immigrant earnings patterns.     

When less conditioning provides better estimates: overcontrol and endogenous selection biases in research on intergenerational mobility

Quality & Quantity - The counterfactual approach to causality has become the dominant approach to understand causality in contemporary social science research. Whilst most sociologists are...     

Estimation of market power in the presence of firm level inefficiencies

“The quiet life hypothesis” (QLH) by Hicks (1935) argues that, due to management’s subjective cost of reaching optimal profits, firms use their market power to allow inefficient allocation of resources. Increasing competitive pressure is therefore likely to force management to work harder to reach optimal profits. Another hypothesis, which also relates market power to efficiency is “the efficient structure hypothesis” (ESH) by Demsetz (1973). ESH argues that firms with superior efficiencies or technologies have lower costs and therefore higher profits. These firms are assumed to gain larger market shares which lead to higher concentration. Ignoring the efficiency levels of the firms in a market power model might cause both estimation and interpretation problems. Unfortunately, the literature on market power measurement largely ignores this relationship. In the context of a dynamic setting, we estimate the market power of US airlines in two city-pairs by both allowing inefficiencies of the firms and not allowing inefficiencies of the firms. Using industry level cost data, we estimate the cost function parameters and time-varying efficiencies. An instrumental variables version of the square root Kalman filter is used to estimate time-varying conduct parameters.     

Estimation of the elasticity of substitution in the presence of errors of measurement

Under certain circumstances an estimate of the elasticity of substitution for competitive exports in international trade may be bracketed when prices are not directly measured. Often only value and quantity data are available. In this case regressing value ratios on quantity ratios and vice versa will bracket the estimate as the asymptotic biases will have opposite signs. If values are divided by quantities to generate a price series, and then regressions are run, both estimates will be biased towards zero and not provide the bounds sought.     

Capital market reactions to earnings announcements: empirical evidence on the difference in the information content of IAS-based earnings and EC-Directives-based earnings

Listing on a foreign stock exchange and the aim to attract international investors usually forces European quoted companies to adapt information supplied in financial statements to different information needs of international investors. Because of the dominance of the American stock market, this adaptation raises especially the question whether Anglo-American-oriented accounting standards (for instance IAS — International Accounting Standards) convey a higher information content for investors than continental-Europe-oriented accounting standards (for instance EC-Directives). The study examines the information content of earnings announcements, i.e. abnormal returns resulting from un-expected earnings, for a sample of Swiss quoted companies which have changed the accounting standard used for presenting Swiss GAAP consolidated financial statements to either EC-Directives or IAS and can therefore contribute to this discussion. The results of the study suggest that IAS-based earnings announce-ments convey a statistically significant higher information content than earnings announcements based on the Swiss GAAP if a variance-approach is used. For investors in the Swiss capital market, the switch from Swiss GAAP to IAS has therefore increased the information content of financial statements. But comparing IAS-based and EC-Directives-based earnings announcements, the results suggest that for investors IAS-based earnings do not possess a statistically significant higher information content than EC-Directives-based earnings. This result has been achieved despite the fact that for Swiss financial analysts financial statements based on IAS convey a significant higher information content than financial statements based on EC-Directives. Avoiding problems in specifying a model for unexpected earnings by standardizing the mean of the abnormal returns of each event window to a positive value does not lead to a different conclusion if the variance approach is used.     

Estimation of firm-level productivity in the presence of exports: Evidence from China's manufacturing

Motivated by the long-standing interest of economists in understanding the nexus between firm productivity and export behavior, this paper develops a novel structural framework for control-function-based nonparametric identification of the gross production function and latent firm productivity in the presence of endogenous export opportunities that is robust to recent unidentification critiques of proxy estimators. We provide a workable identification strategy, whereby the firm's degree of export orientation provides the needed (excluded) relevant independent exogenous variation in endogenous freely varying inputs, thus allowing us to identify the production function. We estimate our fully nonparametric instrumental variable model using the Landweber–Fridman regularization with the unknown functions approximated via artificial neural network sieves with a sigmoid activation function, which are known for their superior performance relative to other popular sieve approximators, including the polynomial series favored in the literature. Using our methodology, we obtain robust productivity estimates for manufacturing firms from 28 industries in China during the 1999–2006 period to take a close look at China's exporter productivity puzzle, whereby exporters are found to exhibit lower productivity levels than nonexports.     

Estimation of population ratio in cluster sampling over successive sampling in the presence of non-response

Quality & Quantity - In this paper, we have discussed the problem of estimating the population ratio in cluster sampling over two occasion successive sampling in the presence of non-response....     

Structural estimates of the intergenerational education correlation

Using a structural dynamic programming model, we investigate the relative importance of family background variables and individual specific abilities in explaining cross‐sectional differences in schooling attainments and wages. Each type of ability is the sum of one component correlated with family background variables and a residual (orthogonal) component which is purely individual specific. Household background variables (especially parents' education) account for 68% of the explained cross‐sectional variations in schooling attainments, while ability correlated with background variables accounts for 17% and pure individual specific ability accounts for 15%. Interestingly, individual differences in wages are mostly explained by pure individual specific abilities as they account for as much as 73% of the explained variations in wages. Family background variables account for only 19%, while ability endowments correlated with family background account for 8%. Copyright © 2003 John Wiley & Sons, Ltd.     

Estimation of the threshold stochastic frontier model in the presence of an endogenous sample split variable

Heterogeneity among firms has been an important issue in studying firms’ technical efficiencies. If firms do not randomly fall into different groups with different technologies but by self-selection, statistically it implies the data are subject to the sample selection bias. In this paper, we generalize the stochastic frontier (SF) model to accommodate heterogeneous technologies among firms by considering the threshold SF model with an endogenous threshold variable. We discuss the econometric techniques appropriate for the threshold SF model with panel data. To determine the optimal number of regimes, we use modified the model selection criteria of Gonzalo and Pitarakis (J Econom 110(2):319–352, 2002) and investigate their finite sample performance by some Monte Carlo experiments. Finally, we also demonstrate our approach by an empirical example.     

Estimation of a survival curve with randomly censored data in the presence of a covariate

This paper deals with the estimation of a survival curve in models with random right censoring and dependent censoring mechanism. We consider a specific dependent censorship model in which conditional on a covariate, the survival and censoring times are assumed to be independent. We investigate asymptotic properties of a corrected version of a survival curve estimator introduced by Cheng (1989). In particular we show uniform strong consistency and weak convergence to a Gaussian process. Comparisons of this estimator with the well-known Kaplan-Meier-estimator are included. Finally, some examples illustrate how the estimator performs. Received: February 2000