Measurement error and its impact on estimates of income dynamics

Nayoung Lee
Additional contact information
Nayoung Lee: University of Cincinnati

Empirical Economics, 2022, vol. 63, issue 5, No 7, 2539-2550

Abstract: Abstract This paper examines whether reported income generates biases for studies on economic mobility and poverty dynamics. Using a linear measurement error model capturing mean-reverting measurement error, this study finds that substantial classical measurement error exists in reported data, leading to a bias toward zero in the estimate of income dynamics. Time-invariant non-classical measurement error and unobserved heterogeneity offset the effect of classical measurement error. This study also identifies the standard deviation of the measurement error, which is estimated to be about 70% of that of the equation error in the income model, suggesting that random measurement error is substantial.

Keywords: Measurement error; Non-classical measurement error; Economic mobility; Income dynamics (search for similar items in EconPapers)
JEL-codes: C81 I32 O15 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s00181-022-02218-4 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
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: https://EconPapers.repec.org/RePEc:spr:empeco:v:63:y:2022:i:5:d:10.1007_s00181-022-02218-4

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

DOI: 10.1007/s00181-022-02218-4

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().