Life-Cycle Variation in the Association between Current and Lifetime Earnings

Steven Haider and Gary Solon

No 11943, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Researchers in a variety of important economic literatures have assumed that current income variables as proxies for lifetime income variables follow the textbook errors-in-variables model. In an analysis of Social Security records containing nearly career-long earnings histories for the Health and Retirement Study sample, we find that the relationship between current and lifetime earnings departs substantially from the textbook model in ways that vary systematically over the life cycle. Our results can enable more appropriate analysis of and correction for errors-in-variables bias in a wide range of research that uses current earnings to proxy for lifetime earnings.

JEL-codes: D3 J3 (search for similar items in EconPapers)
Date: 2006-01
Note: EFG LS
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Citations: View citations in EconPapers (517)

Published as Haider, Steven and Gary Solon. "Life-Cycle Variation In The Association Between Current And Lifetime Earnings," American Economic Review, 2006, v96(4,Sep), 1308-1320.

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Journal Article: Life-Cycle Variation in the Association between Current and Lifetime Earnings (2006)
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