NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Life-Cycle Variation in the Association between Current and Lifetime Earnings

Steven Haider, Gary Solon

NBER Working Paper No. 11943
Issued in January 2006
NBER Program(s):   EFG   LS

Researchers in a variety of important economic literatures have assumed that current income variables as proxies for lifetime income variables follow the textbook errors-in-variables model. In an analysis of Social Security records containing nearly career-long earnings histories for the Health and Retirement Study sample, we find that the relationship between current and lifetime earnings departs substantially from the textbook model in ways that vary systematically over the life cycle. Our results can enable more appropriate analysis of and correction for errors-in-variables bias in a wide range of research that uses current earnings to proxy for lifetime earnings.

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Document Object Identifier (DOI): 10.3386/w11943

Published: Haider, Steven and Gary Solon. "Life-Cycle Variation In The Association Between Current And Lifetime Earnings," American Economic Review, 2006, v96(4,Sep), 1308-1320.

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