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Measurement and Cross-Country Differences

First the selection rules used to define the sample

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Unformatted text preview: stimates of the elasticities. This influence seems to be restricted to whether individuals with zero (or negative) earningslincome are included in the sample before the average is calculated. If fathers must have at least $1 of earnings in each of the five years over which the average is calculated (as opposed to the average being at least $1) the earnings-earnings elasticity increases from 0.131 to 0.228 (see Rows 1 and 2 in Panel A). The elasticity does not change much beyond this as the cutoff is raised further, reaching 0.242 at a cutoff of $3,000. 513 Fortin – Econ 560 Lecture 5B 2 ln y1 0 1 ln y0 2 age1 3 age12 4 age0 5 age0 They use nonparametric techniques to uncover significant nonlinearities and show that I intergenerational earnings mobility is greater at the lower end of the income distribution than at the upper end, and displays an inverted V-shape elsewhere. A common drawback of using administrative data is that human capital and labour supply variables are typically unavailable, which can introduce considerable measurement error in the earnings measures. Mazumder (2005) tries to overcome this problem by using the 1984 Survey of Income and Program Participation (SIPP) matched to the Social Security Administration’s Summary Earnings Records (SER) but ends with small sample sizes. He argues that transitory fluctuations in parental incomes that can have effects lasting more then 5 years so that using even 5-year averages of fathers’ earnings yields estimates that are biased down by approximately 30% and thus the IGE should actually be closer to 0.6. 246 THE REVIEW OF ECONOMICS AND STATISTICS TABLE 4.—INTERGENERATIONAL ELASTICITIES USING SER FOR FATHERS’ EARNINGS Elasticity (Standard Error) N Fathers Log Avg. Earn. Sons 84–85 82–85 79–85 Daughters 76–85 70–85 84–85 82–85 79–85 Pooled 76–85 70–85 84–85 82–85 79–85 76–85 70–85 Father Earnings Must Be Positive Each Year Drop noncovered fathers 0.253 0.349 0.445 0.553 0.613 0.363 0.425 0.489 0.557 0.570 0.308 0.388 0.470 0.559...
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