Non disponibile in italiano
Manuel Arellano
- 30 July 2026
- WORKING PAPER SERIES - No. 3264Details
- Abstract
- We develop a new approach to estimating earnings, job, and employment dynamics using subjective expectations data from the NY Fed Survey of Consumer Expectations. These data provide beliefs about future earnings offers and acceptance probabilities, offering direct information on counterfactual outcomes and enabling identification under weaker assumptions. Our framework avoids biases from selection and unobserved heterogeneity that affect models using realized outcomes. First-step fixed-effects regressions identify risk, persistence, and transition effects; second-step GMM recovers the covariance structure of unobserved heterogeneities such as ability, mobility, and match quality. We find lower risk and persistence of the individual productivity component than in prior work, but greater heterogeneity in ability and match quality. Simulations show that reduced-form estimates overstate persistence and volatility on individual-level productivity due to job transitions and sorting. After accounting for heterogeneity, volatility declines and becomes flat across the earnings distribution. These results underscore the value of expectations data.
- JEL Code
- C23 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Panel Data Models, Spatio-temporal Models
C81 : Mathematical and Quantitative Methods→Data Collection and Data Estimation Methodology, Computer Programs→Methodology for Collecting, Estimating, and Organizing Microeconomic Data, Data Access
D15 : Microeconomics→Household Behavior and Family Economics