Measuring Income Mobility using Pseudo-Panel Data

Year: 2013       Vol.: 62       No.: 2      

Authors: Arturo M. Martinez Jr; Mark Western; Michele Haynes; Wojtek Tomaszewski

Abstract:

To reconcile the need of providing a more dynamic perspective of the evolution of income distribution with the lack of panel data, several techniques have been offered to construct pseudo-panel data from repeated cross-sectional surveys. Using actual panel data from the Philippines, this study evaluates the performance of four pseudo-panel techniques in measuring a wide array of income mobility indicators. Preliminary results suggest that methods with more flexible income model specifications perform better than those with highly parameterized models. More importantly, these flexible pseudo-panel procedures produced estimates of poverty dynamics and movement-based indices which are quite close to the estimates computed from the actual panel data. Nevertheless, further improvements are warranted to be able to develop a more satisfactory estimation procedure for indices measuring temporal dependence and the inequality-reducing effect of income mobility.

Keywords: panel survey; cross-sectional survey; temporal; dependence; income distribution

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