Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/200564 
Year of Publication: 
2017
Series/Report no.: 
Working Paper No. 2017-18
Publisher: 
Federal Reserve Bank of Chicago, Chicago, IL
Abstract: 
A standard approach to estimating structural parameters in life-cycle models imposes sufficient assumptions on the data to identify the "age profile" of outcomes, then chooses model parameters so that the model's age profile matches this empirical age profile. I show that this approach is both incorrect and unnecessary: incorrect, because it generally produces inconsistent estimators of the structural parameters, and unnecessary, because consistent estimators can be obtained under weaker assumptions. I derive an estimation method that avoids the problems of the standard approach. I illustrate the method's benefits analytically in a simple model of consumption inequality and numerically by reestimating the classic life-cycle consumption model of Gourinchas and Parker (2002).
Subjects: 
Age-time-cohort identification problem
Life-cycle models
JEL: 
C23
D91
J1
Document Type: 
Working Paper

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