Measuring the effects of aggregate shocks on cross-sectional distributions

• Department of Economics

This event features a paper presentation by Frank Schorfheide, University of Pennsylvania.

Using an administrative data set from Germany we estimate a functional VAR to measure the response of the earnings distribution to a productivity shock. We then replace the functional part of the VAR by cross-sectional-unit-level income dynamics equations (csuVAR), discuss model properties and estimation. In the empirical application we compare the csuVAR responses to the fVAR results and discuss the pros and cons of the respective modeling approaches.

Co-authors: Stephanie Ettmeier (CERGE-EI, Prague) and Chi Hyun Kim (Humboldt University)