Inference for Rank-Rank Regressions
Abstract
The slope coefficient in a rank-rank regression is a popular measure of intergenerational mobility. In this article, we first show that commonly used inference methods for this slope parameter are invalid. Second, when the underlying distribution is not continuous, the OLS estimator and its asymptotic distribution may be highly sensitive to how ties in the ranks are handled. Motivated by these findings we develop a new asymptotic theory for the OLS estimator in a general class of rank-rank regression specifications without imposing any assumptions about the continuity of the underlying distribution. We then extend the asymptotic theory to other regressions involving ranks that have been used in empirical work. Finally, we apply our new inference methods to two empirical studies on intergenerational mobility, highlighting the practical implications of our theoretical findings.
About Daniel Wilhelm
Daniel Wilhelm received his PhD from the University of Chicago. He worked for 10 years at University College London and now is Professor of Statistics and Econometrics at LMU Munich. His current research interests focus on measurement error, inference involving ranks, and methods for the study of inequality.
Language
English
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