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Intergenerational income immobility in Finland: contrasting roles for parental earnings and family income

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  • Robert Lucas

    ()

  • Sari Kerr

Abstract

An intergenerational model is developed, nesting heritable earning abilities and credit constraints limiting human capital investments in children. Estimates on a large, Finnish data panel indicate very low transmission from parental earnings, suggesting that the parameter of inherited earning ability is tiny. Family income, particularly during the phase of educating children, is shown to be much more important in shaping children’s lifetime earnings. This influence of parental incomes on children’s earnings rises as the children age because the returns to education rise. Despite Finland’s well-developed welfare state, persistence in economic status across generations is much higher than previously thought. Copyright Springer-Verlag 2013

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File URL: http://hdl.handle.net/10.1007/s00148-012-0442-8
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Bibliographic Info

Article provided by Springer in its journal Journal of Population Economics.

Volume (Year): 26 (2013)
Issue (Month): 3 (July)
Pages: 1057-1094

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Handle: RePEc:spr:jopoec:v:26:y:2013:i:3:p:1057-1094

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Related research

Keywords: Intergenerational explanations panel; J62; J13; I21;

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References

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Cited by:
  1. Arnaud Lefranc & Fumiaki Ojima & Takashi Yoshida, 2011. "Intergenerational earnings mobility in Japan among sons and daughters : levels and trends," THEMA Working Papers 2011-10, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  2. Kraay, Aart & McKenzie, David, 2014. "Do poverty traps exist ?," Policy Research Working Paper Series 6835, The World Bank.
  3. Lindahl, Mikael & Palme, Mårten & Sandgren Massih, Sofia & Sjögren, Anna, 2013. "Long-term intergenerational persistence of human capital: an empirical analysis of four generations," Research Papers in Economics 2013:3, Stockholm University, Department of Economics.

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