Heterogeneous income profiles and lifecycle bias in intergnerational mobility estimation Articles uri icon

publication date

  • December 2016

start page

  • 239

end page

  • 268

issue

  • 1

volume

  • 51

International Standard Serial Number (ISSN)

  • 0022-166X

Electronic International Standard Serial Number (EISSN)

  • 1548-8004

abstract

  • Using short snapshots of income in intergenerational mobility estimation causes "lifecycle bias" if the snapshots cannot mimic lifetime outcomes. We use uniquely long series of Swedish income data to show that this bias is large and to examine current strategies to reduce it. We confirm that lifecycle bias is smallest when incomes are measured around midlife, a central implication from a widely adopted generalization of the classical errors-in-variables model. However, the model cannot predict the ideal age of measurement or eliminate lifecycle bias at other ages. We illustrate how extensions of this model can reduce the bias further.

keywords

  • earnings; persistence; association; sweden