The age-time-cohort problem and the identification of structural parameters in life-cycle models

Arbeitspapier

A standard approach to estimating structural parameters in life-cycle models imposes sufficient assumptions on the data to identify the "age profile" of outcomes, then chooses model parameters so that the model's age profile matches this empirical age profile. I show that this approach is both incorrect and unnecessary: incorrect, because it generally produces inconsistent estimators of the structural parameters, and unnecessary, because consistent estimators can be obtained under weaker assumptions. I derive an estimation method that avoids the problems of the standard approach. I illustrate the method's benefits analytically in a simple model of consumption inequality and numerically by reestimating the classic life-cycle consumption model of Gourinchas and Parker (2002).

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2017-18

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡
• Subject: Age-time-cohort identification problem ; Life-cycle models ; Lebenszyklus ; Panel ; Wirtschaftsmodell ; Modellierung ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schulhofer-Wohl, Sam
• Event: Veröffentlichung
• (who): Federal Reserve Bank of Chicago
• (where): Chicago, IL
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/200564
• Last update: 10.03.2025, 11:45 AM CET