Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/210957 
Year of Publication: 
2019
Series/Report no.: 
Discussion Papers No. 897
Publisher: 
Statistics Norway, Research Department, Oslo
Abstract: 
Intergenerational persistence estimates are susceptible to several well-documented biases arising from income measurement, and it has become standard practice to construct income measures to mitigate these. However, remaining bias can lead to a spurious grandparent coefficient estimate in multigenerational regressions, a recent focus of the mobility literature. We show with theory and simulations that even using a 30-year income average can result in a small positive spurious grandfather coefficient estimate. We further propose an IV approach, showing that it is not susceptible to this spillover bias in simplified settings and that it can provide bounds on the parameters in a more general scenario. With administrative data from Norway, we reveal a positive spillover bias in the grandfather coefficient estimates, and the combined evidence from our OLS and IV approaches suggest the preferred small positive OLS estimate could still be upward biased.
Subjects: 
Multigenerational mobility
income mobility
measurement error
spillover bias
JEL: 
J62
C30
Document Type: 
Working Paper

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