Stata Command: cdecompose.ado
The Stata output displayed below summarizes estimates of the mean, standard deviation, skewness and kurtosis of each of the permanent component Uit of earnings and the transitory component Vit of earnings for U.S. men at the age of 40 who have strong labor force attachment. The base model is the canonical permanent-transitory model (Hu, Moffitt, and Sasaki, 2019) with ARMA(2,1) transitory process. Both the permanent earnings and transitory earnings exhibit negative skew, implying that the tails are on the poorer side. The distributions of the permanent and transitory earnings are also leptokurtic, implying that they have a heavier tail than the normal distributions. These results illustrate features of permanent earnings inequality in the U.S. The results can be produced by the STATA command cdecompose as follows:
Installation:
. ssc install cdecompose
Usage:
. cdecompose y37 y38 y39 y40 y41 y42, p(2) q(1)
Help:
. help cdecompose
Reference: Hu, Y., R. Moffitt, and Y. Sasaki (2019) Semiparametric Estimation of the Canonical Permanent‐Transitory Model of Earnings Dynamics. Quantitative Economics, 10 (4), pp. 1495-1536. Paper.