Practice question · Multiple choice
Survey data show that people born after 1990 report lower rates of home ownership than people born in the 1950s did at the same age. Why can that difference not be attributed to a generational character without further assumptions?
Hints
- Ask what else changed between the two observations besides who was being observed.
- Cohort equals period minus age, which makes the three impossible to separate statistically.
Show the answer
C. Linear dependence of age, period and cohort requires external assumptions
Why
Housing costs, credit conditions and labour contracts all changed over the same span, and those are period effects falling on everybody. Because cohort is an exact function of period and age, no model can apportion the difference between them on the data alone; the split requires an assumption, and the honest version of the claim states which one.
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