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The Intergenerational Transmission of Income Volatility: Is Riskiness Inherited?

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  • Stephen H. Shore

Abstract

This article examines the intergenerational transmission of income risk. Do risky parents have risky kids? Income volatility-a proxy for income risk-is not observed directly; instead, it must be estimated with substantial error from the time series variability of income. I characterize an income process with individual-specific volatility parameters and estimate the joint distribution of volatility parameters for fathers and for their adult sons. In data from the Panel Study of Income Dynamics, fathers with higher income volatility have sons with higher income volatility. This finding is correlated with, but far from fully explained by, the intergenerational transmission of risk tolerance and of the propensity for self-employment.

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  • Stephen H. Shore, 2011. "The Intergenerational Transmission of Income Volatility: Is Riskiness Inherited?," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 29(3), pages 372-381, July.
    • Handle: RePEc:taf:jnlbes:v:29:y:2011:i:3:p:372-381
    DOI: 10.1198/jbes.2011.08091
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    Cited by:

    1. Christelis, Dimitris & Dobrescu, Loretti I. & Motta, Alberto, 2020. "Early life conditions and financial risk-taking in older age," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    2. Markus Jäntti & Stephen P. Jenkins, 2013. "Income Mobility," SOEPpapers on Multidisciplinary Panel Data Research 607, DIW Berlin, The German Socio-Economic Panel (SOEP).
    3. Huebener, Mathias, 2015. "The role of paternal risk attitudes in long-run education outcomes and intergenerational mobility," Economics of Education Review, Elsevier, vol. 47(C), pages 64-79.
    4. Henrik Cronqvist & Florian Münkel & Stephan Siegel, 2014. "Genetics, Homeownership, and Home Location Choice," The Journal of Real Estate Finance and Economics, Springer, vol. 48(1), pages 79-111, January.
    5. Elin Halvorsen & Serdar Ozkan & Sergio Salgado, 2022. "Earnings dynamics and its intergenerational transmission: Evidence from Norway," Quantitative Economics, Econometric Society, vol. 13(4), pages 1707-1746, November.
    6. Necker, Sarah & Voskort, Andrea, 2014. "Intergenerational transmission of risk attitudes – A revealed preference approach," European Economic Review, Elsevier, vol. 65(C), pages 66-89.
    7. Aguilar, Alexandra Cortés & García Muñoz, Teresa M. & Moro-Egido, Ana I., 2013. "Heterogeneous self-employment and satisfaction in Latin America," Journal of Economic Psychology, Elsevier, vol. 39(C), pages 44-61.
    8. Elin Halvorsen & Serdar Ozkan & Sergio Salgado, 2021. "Earnings Dynamics and Its Intergenerational Transmission: Evidence from Norway," Working Papers 2021-015, Federal Reserve Bank of St. Louis, revised 07 Jul 2022.

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