The Age-Time-Cohort Problem and the Identification of Structural Parameters in Life-Cycle Models

Sam Schulhofer-Wohl

No WP-2017-18, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: A standard approach to estimating structural parameters in life-cycle models imposes sufficient assumptions on the data to identify the ?age profile\" of outcomes, then chooses model parameters so that the model's age profile matches this empirical age profile. I show that this approach is both incorrect and unnecessary: incorrect, because it generally produces inconsistent estimators of the structural parameters, and unnecessary, because consistent estimators can be obtained under weaker assumptions. I derive an estimation method that avoids the problems of the standard approach. I illustrate the method?s benefits analytically in a simple model of consumption inequality and numerically by reestimating the classic life-cycle consumption model of Gourinchas and Parker (2002).

Keywords: Age-time-cohort identification problem; Life-cycle models (search for similar items in EconPapers)
JEL-codes: C23 D91 J1 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2017-10-19
New Economics Papers: this item is included in nep-dge
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Related works:
Journal Article: The age‐time‐cohort problem and the identification of structural parameters in life‐cycle models (2018)
Working Paper: The age-time-cohort problem and the identification of structural parameters in life-cylce models (2013)
Working Paper: The Age-Time-Cohort Problem and the Identification of Structural Parameters in Life-Cycle Models (2012)
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