In this paper, we show that maximum entropy econometrics offers a feasible way to estimate transition matrices using distributional data from Colombia. Using a cross-entropy estimation method, we make efficient use of prior information about the structure of the transition matrices and how they vary with age. Under weak assumptions about the error generation process, we can derive test statistics based on the likelihood ratio measuring the significance of the estimation. The results show that there is a large degree of upward mobility in Colombia, especially at the bottom of the income distribution and for the younger age cohorts. Download full-text discussion paper .
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