IDEAS home Printed from https://ideas.repec.org/a/eee/econom/v203y2018i2p283-296.html
   My bibliography  Save this article

Nonparametric heteroskedasticity in persistent panel processes: An application to earnings dynamics

Author

Listed:
  • Botosaru, Irene
  • Sasaki, Yuya

Abstract

This paper considers a dynamic panel model where a latent state variable follows a unit root process with nonparametric heteroskedasticity. We develop constructive nonparametric identification and estimation of the skedastic function. Applying this method to the Panel Survey of Income Dynamics (PSID) in the framework of earnings dynamics, we found that workers with lower pre-recession permanent earnings had higher earnings risk during the three most recent recessions.

Suggested Citation

  • Botosaru, Irene & Sasaki, Yuya, 2018. "Nonparametric heteroskedasticity in persistent panel processes: An application to earnings dynamics," Journal of Econometrics, Elsevier, vol. 203(2), pages 283-296.
    • Handle: RePEc:eee:econom:v:203:y:2018:i:2:p:283-296
    DOI: 10.1016/j.jeconom.2017.11.010
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304407617302427
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jeconom.2017.11.010?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Evdokimov, Kirill & White, Halbert, 2012. "Some Extensions Of A Lemma Of Kotlarski," Econometric Theory, Cambridge University Press, vol. 28(4), pages 925-932, August.
    2. Christopher D. Carroll, 1997. "Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(1), pages 1-55.
    3. Jonathan Heathcote & Fabrizio Perri & Giovanni L. Violante, 2010. "Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States: 1967-2006," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 15-51, January.
    4. Costas Meghir & Luigi Pistaferri, 2004. "Income Variance Dynamics and Heterogeneity," Econometrica, Econometric Society, vol. 72(1), pages 1-32, January.
    5. Michael P. Keane & Eswar S. Prasad, 1991. "The relation between skill levels and the cyclical variability of employment, hours and wages," Discussion Paper / Institute for Empirical Macroeconomics 41, Federal Reserve Bank of Minneapolis.
    6. Li, Degui & Lu, Zudi & Linton, Oliver, 2012. "Local Linear Fitting Under Near Epoch Dependence: Uniform Consistency With Convergence Rates," Econometric Theory, Cambridge University Press, vol. 28(5), pages 935-958, October.
    7. Stéphane Bonhomme & Jean-Marc Robin, 2010. "Generalized Non-Parametric Deconvolution with an Application to Earnings Dynamics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(2), pages 491-533.
    8. Susanne M. Schennach, 2004. "Estimation of Nonlinear Models with Measurement Error," Econometrica, Econometric Society, vol. 72(1), pages 33-75, January.
    9. Delaigle, A. & Gijbels, I., 2004. "Practical bandwidth selection in deconvolution kernel density estimation," Computational Statistics & Data Analysis, Elsevier, vol. 45(2), pages 249-267, March.
    10. Fatih Guvenen & Serdar Ozkan & Jae Song, 2014. "The Nature of Countercyclical Income Risk," Journal of Political Economy, University of Chicago Press, vol. 122(3), pages 621-660.
    11. Li, Tong & Vuong, Quang, 1998. "Nonparametric Estimation of the Measurement Error Model Using Multiple Indicators," Journal of Multivariate Analysis, Elsevier, vol. 65(2), pages 139-165, May.
    12. Michael Keane & Eswar Prasad, 1993. "Skill Levels and the Cyclical Variability of Employment, Hours, and Wages," IMF Staff Papers, Palgrave Macmillan, vol. 40(4), pages 711-743, December.
    13. Schennach, Susanne M., 2004. "Nonparametric Regression In The Presence Of Measurement Error," Econometric Theory, Cambridge University Press, vol. 20(6), pages 1046-1093, December.
    14. Li, Tong, 2002. "Robust and consistent estimation of nonlinear errors-in-variables models," Journal of Econometrics, Elsevier, vol. 110(1), pages 1-26, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Okui, Ryo & Yanagi, Takahide, 2019. "Panel data analysis with heterogeneous dynamics," Journal of Econometrics, Elsevier, vol. 212(2), pages 451-475.
    2. Manuel Arellano & Richard Blundell & Stéphane Bonhomme, 2017. "Earnings and Consumption Dynamics: A Nonlinear Panel Data Framework," Econometrica, Econometric Society, vol. 85, pages 693-734, May.
    3. Manuel Arellano & Stéphane Bonhomme, 2023. "Recovering Latent Variables by Matching," Journal of the American Statistical Association, Taylor & Francis Journals, vol. 118(541), pages 693-706, January.
    4. Botosaru, Irene, 2023. "Time-varying unobserved heterogeneity in earnings shocks," Journal of Econometrics, Elsevier, vol. 235(2), pages 1378-1393.
    5. Irene Botosaru, 2017. "Identifying Distributions in a Panel Model with Heteroskedasticity: An Application to Earnings Volatility," Discussion Papers dp17-11, Department of Economics, Simon Fraser University.
    6. Arturas Juodis & Simon Reese, 2018. "The Incidental Parameters Problem in Testing for Remaining Cross-section Correlation," Papers 1810.03715, arXiv.org, revised Feb 2021.
    7. Silvia Sarpietro & Yuya Sasaki & Yulong Wang, 2022. "Non-Existent Moments of Earnings Growth," Papers 2203.08014, arXiv.org, revised Feb 2024.
    8. Dan Ben-Moshe, 2023. "Identifying an Earnings Process With Dependent Contemporaneous Income Shocks," Papers 2303.08460, arXiv.org, revised May 2023.
    9. Kengo Kato & Yuya Sasaki & Takuya Ura, 2021. "Robust inference in deconvolution," Quantitative Economics, Econometric Society, vol. 12(1), pages 109-142, January.
    10. Costanza Naguib & Patrick Gagliardini, 2023. "A Semi-nonparametric Copula Model for Earnings Mobility," Diskussionsschriften dp2302, Universitaet Bern, Departement Volkswirtschaft.
    11. Ben-Moshe, Dan, 2023. "Identifying an earnings process with dependent contemporaneous income shocks," Economics Letters, Elsevier, vol. 230(C).
    12. Manuel Arellano & Richard Blundell & Stéphane Bonhomme, 2017. "Earnings and Consumption Dynamics: A Nonlinear Panel Data Framework," Econometrica, Econometric Society, vol. 85, pages 693-734, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Irene Botosaru, 2017. "Identifying Distributions in a Panel Model with Heteroskedasticity: An Application to Earnings Volatility," Discussion Papers dp17-11, Department of Economics, Simon Fraser University.
    2. Kengo Kato & Yuya Sasaki & Takuya Ura, 2021. "Robust inference in deconvolution," Quantitative Economics, Econometric Society, vol. 12(1), pages 109-142, January.
    3. Ben-Moshe, Dan, 2018. "Identification Of Joint Distributions In Dependent Factor Models," Econometric Theory, Cambridge University Press, vol. 34(1), pages 134-165, February.
    4. Hao Dong & Yuya Sasaki, 2022. "Estimation of average derivatives of latent regressors: with an application to inference on buffer-stock saving," Departmental Working Papers 2204, Southern Methodist University, Department of Economics.
    5. Joel L. Horowitz, 2013. "Ill-posed inverse problems in economics," CeMMAP working papers 37/13, Institute for Fiscal Studies.
    6. Stéphane Bonhomme & Jean-Marc Robin, 2010. "Generalized Non-Parametric Deconvolution with an Application to Earnings Dynamics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(2), pages 491-533.
    7. Joel L. Horowitz, 2013. "Ill-posed inverse problems in economics," CeMMAP working papers CWP37/13, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    8. Krueger, D. & Mitman, K. & Perri, F., 2016. "Macroeconomics and Household Heterogeneity," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 843-921, Elsevier.
    9. Kengo Kato & Yuya Sasaki & Takuya Ura, 2018. "Inference based on Kotlarski's Identity," Papers 1808.09375, arXiv.org, revised Sep 2019.
    10. Karun Adusumilli & Taisuke Otsu, 2015. "Nonparametric instrumental regression with errors in variables," STICERD - Econometrics Paper Series /2015/585, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    11. Xiaohong Chen & Yingyao Hu, 2006. "Identification and Inference of Nonlinear Models Using Two Samples with Arbitrary Measurement Errors," Cowles Foundation Discussion Papers 1590, Cowles Foundation for Research in Economics, Yale University.
    12. Schennach, Susanne M., 2019. "Convolution without independence," Journal of Econometrics, Elsevier, vol. 211(1), pages 308-318.
    13. Delaigle, Aurore & Meister, Alexander, 2007. "Nonparametric Regression Estimation in the Heteroscedastic Errors-in-Variables Problem," Journal of the American Statistical Association, American Statistical Association, vol. 102, pages 1416-1426, December.
    14. Botosaru, Irene, 2023. "Time-varying unobserved heterogeneity in earnings shocks," Journal of Econometrics, Elsevier, vol. 235(2), pages 1378-1393.
    15. Kurisu, Daisuke & Otsu, Taisuke, 2022. "On the uniform convergence of deconvolution estimators from repeated measurements," LSE Research Online Documents on Economics 107533, London School of Economics and Political Science, LSE Library.
    16. Anish Agarwal & Rahul Singh, 2021. "Causal Inference with Corrupted Data: Measurement Error, Missing Values, Discretization, and Differential Privacy," Papers 2107.02780, arXiv.org, revised Feb 2024.
    17. Manuel Arellano & Richard Blundell & Stéphane Bonhomme, 2017. "Earnings and Consumption Dynamics: A Nonlinear Panel Data Framework," Econometrica, Econometric Society, vol. 85, pages 693-734, May.
    18. Susanne M. Schennach, 2012. "Measurement error in nonlinear models - a review," CeMMAP working papers 41/12, Institute for Fiscal Studies.
    19. Xiaohong Chen & Han Hong & Denis Nekipelov, 2011. "Nonlinear Models of Measurement Errors," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 901-937, December.
    20. Kato, Kengo & Sasaki, Yuya, 2019. "Uniform confidence bands for nonparametric errors-in-variables regression," Journal of Econometrics, Elsevier, vol. 213(2), pages 516-555.

    More about this item

    Keywords

    Conditional heteroskedasticity; Nonparametric identification; Earnings risk;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:econom:v:203:y:2018:i:2:p:283-296. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jeconom .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.