Galtonian Regression of Intergenerational Income Linkages: Biased Procedures, a New Estimator and Mean-Square Error Comparisons

Ramses H. Abul Naga

Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) from Université de Lausanne, Faculté des HEC, DEEP

Abstract: Because the permanent incomes of parents are children are typically unobserved, the estimation of the intergenerational correlation via the use of proxy variables entails an errors-in-variables bias. By solving a system of moment equations for income observed at a given year, and a T-period average of this variable, we derive an analytical form for the signal to total variance ratio. In turn, we propose a simple estimator of the intergenerational elasticity via division of the OLS estimator by this quantity. Estimates of the intergenerational elasticity derived from a PSID sample range between 0.34 and 0.69. The averaging estimator provides intermediary values between OLS and the proposed estimator. Persistence is higher for family income measures than labor market outcomes. Estimates generally increase for moving average specifications in comparison to the assumption that measurement errors are uncorrelated. The three estimators are further examined in the light of their mean-square errors (square bias plus variance).

Keywords: intergenerational mobility; Galtonian regression; errors in variables; mean-square errors (search for similar items in EconPapers)
JEL-codes: I3 J62 (search for similar items in EconPapers)
Date: 2000-06
View list of references View citations in EconPapers

Downloads: (external link)
http://www.hec.unil.ch/deep/textes/00.13.pdf (application/pdf)

Related works:
Working Paper: Galtonian Regression of Intergenerational Income Linkages: Biased Procedures, a New Estimator and Mean-Square Error Comparisons (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:lau:crdeep:00.13

Access Statistics for this paper

More papers in Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) from Université de Lausanne, Faculté des HEC, DEEP
Address: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
Series data maintained by Claudine Delapierre Saudan ().