Inference on “earnings dynamics over the life cycle: New evidence for New Zealand”

Paul Hansen

New Zealand Economic Papers, 1997, vol. 31, issue 2, 221-227

Abstract: This note re-examines the main finding of Creedy's (1997a) study of income dynamics in New Zealand: regression towards the mean of taxable income and negative serial correlation. The Wald tests he used to conduct statistical inference, as well as being asymptotic tests, are not invariant to reparam-eterisations of the non-linear restrictions that are tested to arrive at this result. An alternative small-sample testing strategy, based on linear restrictions, is used here, and Creedy's finding is confirmed.

Date: 1997
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DOI: 10.1080/00779959709544275

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