Are Earnings Inequality and Mobility Overstated? The Impact of Nonclassical Measurement Error
By P. Gottschalk, Minh Huynh. Review of Economics and Statistics, 2010
132 citations recorded by the source corpus.
Measures of inequality and mobility based on self-reported earnings reflect attributes of both the joint distribution of earnings across time and the joint distribution of measurement error and earnings. While classical measurement error would increase measures of inequality and mobility, there is substantial evidence that measurement error in earnings is not classical. In this paper, we present the analytical links between nonclassical measurement error and some summary measures of inequality and mobility. The empirical importance of nonclassical measurement error is explored using the Survey of Income and Program Participation (SIPP) matched to tax records. We find that the effects of nonclassical measurement error are large. However, these nonclassical effects are largely offsetting when estimating mobility, as measured by the intertemporal correlation in earnings. As a result, SIPP estimates of the correlation are similar to estimates based on tax records, though SIPP estimates of inequality are smaller than estimates based on tax records.
Subfields: Economics and Econometrics, Sociology and Political Science
View Paper: https://www.semanticscholar.org/paper/c5d0e8c401c17fa312af25a82eb10428e1280d32
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In Economics and Econometrics
- Fatih Guvenen
- Giovanni L. Violante
- Greg Kaplan
- Serdar Ozkan
- Jonathan Heathcote
- Jae Song
- Kjetil Storesletten
- Anthony A. Smith
In Sociology and Political Science
- Fatih Guvenen
- Serdar Ozkan
- Giovanni L. Violante
- Jonathan Heathcote
- Kjetil Storesletten
- Jae Song
- Anna Maria Mayda
- Giovanni Facchini
Citations in the corpus
- Estimating Measurement Error in Annual Job Earnings: A Comparison of Survey and Administrative Data (2013, unknown): “TRR0,SIPP = ω ( G +G + Σ0 ) ω { G(θ) +G(ψ) + Σ0 } 11 (13)”
- Consumption and labor supply with partial insurance: An analytical framework (2014, background): “Cunha, Heckman, and Navarro (2005) and Guvenen and Smith (2010), among others, explain the difficulty in distinguishing, empirically, between insurable shocks and predictable changes to income.”
- The Nature of Countercyclical Income Risk (2014, methodology): “The spirit of our analysis is similar to the literature that decomposed wage inequality trends into between-group and within-group components (among many others, Juhn et al. (1993), Lemieux (2006), and Autor et al.”