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GMM estimation of the covariance structure of longitudinal data on earnings

Author

Listed:
  • Aedın Doris

    (National University of Ireland–Maynooth)

  • Donal O’Neill

    (National University of Ireland–Maynooth)

  • Olive Sweetman

    (National University of Ireland–Maynooth)

Abstract

In this article, we discuss generalized method of moments estimation of the covariance structure of longitudinal data on earnings, and we introduce and illustrate a Stata program that facilitates the implementation of the generalized method of moments approach in this context. The program, gmmcovearn, estimates a variety of models that encompass those most commonly used by labor economists. These include models where the permanent component of earnings follows a random growth or random walk process and where the transitory component can follow either an AR(1) or an ARMA(1,1) process. In addition, time-factor loadings and cohort-factor loadings may be incorporated in the transitory and permanent components.

Suggested Citation

  • Aedın Doris & Donal O’Neill & Olive Sweetman, 2011. "GMM estimation of the covariance structure of longitudinal data on earnings," Stata Journal, StataCorp LP, vol. 11(3), pages 439-459, September.
    • Handle: RePEc:tsj:stataj:v:11:y:2011:i:3:p:439-459
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    References listed on IDEAS

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    Cited by:

    1. Mirko Felchner, 2015. "Einkommensdynamik bei Selbständigen als Freie Berufe und abhängig Beschäftigte Eine dynamische Paneldatenschätzung mit Daten des Sozio-oekonomischen Panels," FFB-Discussionpaper 101, Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB)), LEUPHANA University Lüneburg.
    2. Mishra, Aswini Kumar & Gupta, Akul & Bhardwaj, Vedant, 2022. "Permanent inequality versus earnings instability and transmission of income shocks to consumption expenditure in India," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 80-91.
    3. Aedín Doris & Donal O’Neill & Olive Sweetman, 2013. "Identification of the covariance structure of earnings using the GMM estimator," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 11(3), pages 343-372, September.
    4. Olga Bondarenko, 2018. "The Redistributive Effects of Monetary Policy Across Generations," Visnyk of the National Bank of Ukraine, National Bank of Ukraine, issue 244, pages 44-60.

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