A La Recherche Des Moments Perdus: Covariance Models for Unbalanced Panels with Endogenous Death

40 Pages Posted: 7 Jul 2000 Last revised: 1 Jul 2010

See all articles by John M. Abowd

John M. Abowd

U.S. Census Bureau; Cornell University Department of Economics; Labor Dynamics Institute; School of Industrial and Labor Relations; NBER (on leave); CREST; IZA Institute of Labor Economics

Bruno Crepon

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE); IZA Institute of Labor Economics

Francis Kramarz

Independent

Alain Trognon

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

Date Written: May 1995

Abstract

We develop a model for decomposing the covariance structure of panel data on firms into a part due to permanent heterogeneity, a part due to differential histories with unknown ages, and a part due to the evolution of economic shocks to the firm. Our model allows for the endogenous death of firms and correctly handles the problems arising from the estimation of this death process. We implement this model on an unbalanced longitudinal sample of French firms which have both known and unknown ages and histories. For firms with unknown birthdates, we find that the structural autocorrelation in employment, compensation and capital is dominated by the part due to initial heterogeneity and random growth rates. Serial correlation in the periodic shocks is less important. For these firms, profitability, value-added and indebtedness have processes in which the heterogeneity components are less important. Firms with known birthdates and histories (which are younger than the censored firms) have autocorrelation structures dominated by the heterogeneity.

Suggested Citation

Abowd, John Maron and Crepon, Bruno and Kramarz, Francis and Trognon, Alain, A La Recherche Des Moments Perdus: Covariance Models for Unbalanced Panels with Endogenous Death (May 1995). NBER Working Paper No. t0180. Available at SSRN: https://ssrn.com/abstract=225090

John Maron Abowd (Contact Author)

U.S. Census Bureau ( email )

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CREST ( email )

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IZA Institute of Labor Economics

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Germany

Bruno Crepon

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE) ( email )

92245 Malakoff Cedex
France

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Francis Kramarz

Independent

No Address Available
United States

Alain Trognon

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

National Inst of Statistics & Econ Studies (INSEE)
15 Boulevard Gabriel Peri Research Dept.
92245 Malakoff Cedex
France

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