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Nonparametric heteroskedasticity in persistent panel processes: An application to earnings dynamics

Irene Botosaru and Yuya Sasaki

Journal of Econometrics, 2018, vol. 203, issue 2, 283-296

Abstract: This paper considers a dynamic panel model where a latent state variable follows a unit root process with nonparametric heteroskedasticity. We develop constructive nonparametric identification and estimation of the skedastic function. Applying this method to the Panel Survey of Income Dynamics (PSID) in the framework of earnings dynamics, we found that workers with lower pre-recession permanent earnings had higher earnings risk during the three most recent recessions.

Keywords: Conditional heteroskedasticity; Nonparametric identification; Earnings risk (search for similar items in EconPapers)
JEL-codes: C14 C23 E24 (search for similar items in EconPapers)
Date: 2018
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Journal of Econometrics is currently edited by T. Amemiya, A. R. Gallant, J. F. Geweke, C. Hsiao and P. M. Robinson

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