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Estimation of Poverty Transition Matrices with Noisy Data
Author(s) -
Lee Nayoung,
Ridder Geert,
Strauss John
Publication year - 2016
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.2506
Subject(s) - poverty , econometrics , observational error , economics , estimation , panel data , statistics , survey data collection , demographic economics , mathematics , economic growth , management
Summary This paper investigates measurement error biases in estimated poverty transition matrices. We compare transition matrices based on survey expenditure data to transition matrices based on measurement‐error‐free simulated expenditure. The simulation model uses estimates that correct for measurement error in expenditure. We find that time‐varying measurement error in expenditure data magnifies economic mobility. Roughly 45 % of households initially in poverty at time t − 1 are found to be out of poverty at time t using data from the Korean Labor and Income Panel Study. When measurement error is removed, this drops to between 26 and 31 % of households initially in poverty. Copyright © 2016 John Wiley & Sons, Ltd.