Empirical strategies to eliminate life-cycle bias in the intergenerational elasticity of earnings literature

Jan Leonard Stuhler

I argue that the empirical strategies for estimation of the intergenerational elasticity of lifetime earnings that are currently employed in the literature might not eliminate bias arising from life-cycle effects. Specifically, I demonstrate that procedures based on the generalized errors-in-variables model suggested by Haider and Solon (2006) or the consideration of differential earnings growth rates across subpopulations may not yield unbiased or consistent estimates. I further argue that instrumental variable estimators will not identify an upper bound for the true population parameter.

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Year of publication:	2010
Authors:	Stuhler, Jan Leonard
Publisher:	Berlin : DIW
Subject:	intergenerational mobility \| intergenerational elasticity of earnings \| life-cycle bias \| generalized errors-in-variables model \| Lebenseinkommen \| Lifetime income \| Generationengerechtigkeit \| Intergenerational equity \| Soziale Mobilität \| Social mobility \| Einkommenshypothese \| Income hypothesis \| Statistischer Fehler \| Statistical error \| Systematischer Fehler \| Bias