Partial Identification of Economic Mobility: With an Application to the United States

52 Pages Posted: 28 Jan 2019

See all articles by Daniel L. Millimet

Daniel L. Millimet

Southern Methodist University (SMU) - Department of Economics; IZA Institute of Labor Economics

Hao Li

Nanjing Audit University

Punarjit Roychowdhury

Indian Institute of Management, Indore

Abstract

The economic mobility of individuals and households is of fundamental interest. While many measures of economic mobility exist, reliance on transition matrices remains pervasive due to simplicity and ease of interpretation. However, estimation of transition matrices is complicated by the well-acknowledged problem of measurement error in self-reported and even administrative data. Existing methods of addressing measurement error are complex, rely on numerous strong assumptions, and often require data from more than two periods.In this paper, we investigate what can be learned about economic mobility as measured via transition matrices while formally accounting for measurement error in a reasonably transparent manner. To do so, we develop a nonparametric partial identification approach to bound transition probabilities under various assumptions on the measurement error and mobility processes. This approach is applied to panel data from the United States to explore short-run mobility before and after the Great Recession.

Keywords: partial identification, measurement error, mobility, transition matrices, poverty

JEL Classification: C18, D31, I32

Suggested Citation

Millimet, Daniel L. and Li, Hao and Roychowdhury, Punarjit, Partial Identification of Economic Mobility: With an Application to the United States. IZA Discussion Paper No. 12085. Available at SSRN: https://ssrn.com/abstract=3323200

Daniel L. Millimet (Contact Author)

Southern Methodist University (SMU) - Department of Economics ( email )

Box 750496
Dallas, TX 75275
United States
214-768-3269 (Phone)
214-768-1821 (Fax)

HOME PAGE: http:\\www.smu.edu\~millimet

IZA Institute of Labor Economics

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

Hao Li

Nanjing Audit University

86 Yushan W Rd
Pukou, Jiangsu 210017
China

Punarjit Roychowdhury

Indian Institute of Management, Indore ( email )

Prabandh Sikhar
Rau-Pithampur Road
Indore, Madhya Pradesh 453331
India

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