Artikel
Semiparametric estimation of the canonical permanent-transitory model of earnings dynamics
This paper presents identification and estimation results for a flexible state space model. Our modification of the canonical model allows the permanent component to follow a unit root process and the transitory component to follow a semiparametric model of a higher-order autoregressive-moving-average (ARMA) process. Using panel data of observed earnings, we establish identification of the nonparametric joint distributions for each of the permanent and transitory components over time. We apply the identification and estimation method to the earnings dynamics of U.S. men using the Panel Survey of Income Dynamics (PSID). The results show that the marginal distributions of permanent and transitory earnings components are more dispersed, more skewed, and have fatter tails than the normal and that earnings mobility is much lower than for the normal. We also find strong evidence for the existence of higher-order ARMA processes in the transitory component, which lead to much different estimates of the distributions of and earnings mobility in the permanent component, implying that misspecification of the process for transitory earnings can affect estimated distributions of the permanent component and estimated earnings dynamics of that component. Thus our flexible model implies earnings dynamics for U.S. men different from much of the prior literature.
- Sprache
-
Englisch
- Erschienen in
-
Journal: Quantitative Economics ; ISSN: 1759-7331 ; Volume: 10 ; Year: 2019 ; Issue: 4 ; Pages: 1495-1536 ; New Haven, CT: The Econometric Society
- Klassifikation
-
Wirtschaft
Semiparametric and Nonparametric Methods: General
Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
Wages, Compensation, and Labor Costs: General
- Thema
-
Earnings dynamics
semiparametric estimation
state space model
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Hu, Yingyao
Moffitt, Robert A.
Sasaki, Yuya
- Ereignis
-
Veröffentlichung
- (wer)
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The Econometric Society
- (wo)
-
New Haven, CT
- (wann)
-
2019
- DOI
-
doi:10.3982/QE1117
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
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Objekttyp
- Artikel
Beteiligte
- Hu, Yingyao
- Moffitt, Robert A.
- Sasaki, Yuya
- The Econometric Society
Entstanden
- 2019
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