Testing for Mobility Dominance

Abstract

This paper proposes tests for stochastic dominance in mobility based on the empirical likelihood ratio. Two views of mobility are considered, either based on measures of absolute mobility or on transition matrices. First-order and second-order dominance conditions in mobility are first derived, followed by the derivation of statistical inferences techniques to test a null hypothesis of non dominance against an alternative of mobility dominance. An empirical analysis, based on the US Panel Study of Income Dynamics (PSID), is performed by comparing four income mobility periods ranging from 1970 to 1990.