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Measuring income mobility with dirty data

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We examine the performance of measures of mobility when allowance is made for the possibility of data contamination. We find that “singlestage” indices – those that are applied directly to a sample from a multivariate income distribution – usually prove to be non-robust in the face of contamination. However, “two-stage” models of mobility – where the distribution is first “discretised” into income intervals and then a transition matrix or other tool is applied – may be robust if the first stage if appropriately specified.

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