Identifying an earnings process with dependent contemporaneous income shocks

Dan Ben-Moshe

Economics Letters, 2023, vol. 230, issue C

Abstract: This paper proposes a novel approach for identifying coefficients in an earnings dynamics model with arbitrarily dependent contemporaneous income shocks. Traditional methods relying on second moments fail to identify these coefficients, emphasizing the need for nongaussianity assumptions that capture information from higher moments. Our results contribute to the literature on earnings dynamics by allowing models of earnings to have, for example, the permanent income shock of a job change to be linked to the contemporaneous transitory income shock of a relocation bonus.

Keywords: Earnings dynamics model; Statistically dependent contemporaneous income shocks (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:230:y:2023:i:c:s0165176523002860

DOI: 10.1016/j.econlet.2023.111261

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