Publication: Earnings Mobility and Measurement Error : A Pseudo-Panel Approach
The degree of mobility in incomes is often seen as an important measure of the equality of opportunity in a society and of the flexibility and freedom of its labor market. But estimation of mobility using panel data is biased by the presence of measurement error and non-random attrition from the panel. This paper shows that dynamic pseudo-panel methods can be used to consistently estimate measures of absolute and conditional mobility in the presence of non-classical measurement errors. These methods are applied to data on earnings from a Mexican quarterly rotating panel. Absolute mobility in earnings is found to be very low in Mexico, suggesting that the high level of inequality found in the cross-section will persist over time. However, the paper finds conditional mobility to be high, so that households are able to recover quickly from earnings shocks. These findings suggest a role for policies which address underlying inequalities in earnings opportunities.
“Antman, Francisca; McKenzie, David J.. 2005. Earnings Mobility and Measurement Error : A Pseudo-Panel Approach. Policy Research Working Paper; No. 3745. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/c38e0b67-441b-5502-84bf-15769c9b928e License: CC BY 3.0 IGO.”
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