Measurement and Cross-Country Differences

These data have the advantage of large sample size

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Unformatted text preview: dow to estimate lifetime earnings that allow the relationship between current earnings and lifetime earnings to be evaluated (e.g. Haider and Solon, 2003). Corak and Heisz (1999) is such an early study using Canadian income tax data on about 400,000 father-son pairs, and they find intergenerational earnings elasticities to be about 0.2. substantially lower than for the U.S, when estimating the relationship: Source: Corak and Heisz (1999) Corak and Heisz Table 3 Intergenerational Elasticities for Various Samples and Specifications: Father and Son Earnings and Market Income Earnings Elasticity Standard Error Total Market Income Elasticity Standard Error A. Sample selection rules 1. Average income over five years 2 $1 2 . Income in each of five years 2 $1 3. Income in each of five years 2 $100 4. Income in each of five years 3 $1,000 5 . Income in each of five years 2 $3,000 B . Life cycle adjustments 1. Quadratic in age of fathers and sons 2. No controls for age 3. Dummy variables for age of sons 4 . Quartic in age of fathers and sons 5 . Oldest sons born in 1963 6. Oldest sons born in 1966 7 . All siblings 8. Controls for marital status C. Choice of regressor 1 . Eatnings 2 . Total market income D. Estimation method Average income over five years 2 $1 1. Least squares 2 . Median regression Income in each of five years 2 $ 1 3. Least squares 4 . Median regression horizon would appear to be long enough to reduce the bias due to transitory income fluctuations. The robustness of these findings to the sample selection rules employed, the way in which adjustments for life cycle differences is made, and the choice of the father's income variable are assessed in Table 3. All of the results in this table are based upon five year averages of the father's income measure. The four rows labeled 1 in each of the panels of Table 3 repeat the results in the last column of Table 2. There are three major findings. First, the selection rules used to define the sample seem to have an important influence on the e...
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