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On the Evaluation of Economic Mobility

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Author Info
Peter Gottschalk () (Boston College)
Enrico Spolaore () (Boston College)

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Abstract

This paper provides an explicit welfare basis for evaluating economic mobility. Our social welfare function can be seen as a natural dynamic extension of the static social welfare function presented in Atkinson and Bourguignon (1982). Unlike Atkinson and Bourguignon, we use social preferences a la Kreps-Porteus, for which the timing of resolution of uncertainty may matter. Within this generalized framework, we show that welfare evaluation of mobility depends on the interplay between aversion to inequality, risk aversion, and aversion to intertemporal fluctuations. This framework allows us to provide a welfare analysis not only of "reversal" (which has been the focus of much of the literature) but also of "origin independence" (which has not received an explicit welfare foundation in the literature). We use our framework to develop welfare measures of mobility, and apply these measures to intergenerational mobility in the United States using PSID data. We show that the value of origin independence is quantitatively important. We also show that different subpopulations experience different mobility patterns: reversal is more important than origin independence for blacks but the opposite is true for non-blacks.

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Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 407..

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Length: 32 pages
Date of creation: 28 May 1998
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Handle: RePEc:boc:bocoec:407

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Keywords: mobility;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  2. Benabou, R. & Ok, E.A., 2000. "Mobility as Progressivity: Ranking Income Processes According to Equality of Opportunity," Papers 211, Princeton, Woodrow Wilson School - Public and International Affairs.
    Other versions:
  3. Epstein, Larry G & Wang, Tan, 1994. "Intertemporal Asset Pricing Under Knightian Uncertainty," Econometrica, Econometric Society, vol. 62(2), pages 283-322, March. [Downloadable!] (restricted)
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  7. Weil, Philippe, 1990. "Nonexpected Utility in Macroeconomics," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 29-42, February. [Downloadable!] (restricted)
  8. Kreps, David M & Porteus, Evan L, 1979. "Dynamic Choice Theory and Dynamic Programming," Econometrica, Econometric Society, vol. 47(1), pages 91-100, January. [Downloadable!] (restricted)
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  13. Alesina, Alberto F & Di Tella, Rafael & MacCulloch, Robert, 2001. "Inequality and Happiness: Are Europeans and Americans Different?," CEPR Discussion Papers 2877, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  14. Fields, Gary S. & Ok, Efe A., 1996. "The Meaning and Measurement of Income Mobility," Journal of Economic Theory, Elsevier, vol. 71(2), pages 349-377, November. [Downloadable!] (restricted)
  15. J. Fitzgerald & P. Gottschalk & R. Moffitt, . "An Analysis of Sample Attrition in Panel Data: The Michigan Panel Study of Income Dynamics," Institute for Research on Poverty Discussion Papers 1156-98, University of Wisconsin Institute for Research on Poverty. [Downloadable!]
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  21. Dardanoni Valentino, 1993. "Measuring Social Mobility," Journal of Economic Theory, Elsevier, vol. 61(2), pages 372-394, December. [Downloadable!] (restricted)
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  25. Epstein, Larry G & Zin, Stanley E, 1989. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework," Econometrica, Econometric Society, vol. 57(4), pages 937-69, July. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. C. Schluter & D. Van De Gaer, 2008. "Structural Mobility, Exchange Mobility and Subgroup Consistent Mobility Measurement – US–German Mobility Measurements Revisited," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 08/543, Ghent University, Faculty of Economics and Business Administration. [Downloadable!]
  2. Alberto Alesina & George-Marios Angeletos, 2004. "Fairness and Redistribution," Levine's Bibliography 122247000000000283, UCLA Department of Economics. [Downloadable!]
    Other versions:
  3. Robert Aebi & Klaus Neusser & Peter Steiner, 2006. "A Large Deviation Approach to the Measurement of Mobility," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 142(II), pages 195-222, June. [Downloadable!]
    Other versions:
  4. James W. Boudreau, 2008. "Stratification and Growth in Agent-based Matching Markets," Working papers 2008-30, University of Connecticut, Department of Economics. [Downloadable!]
  5. Rolf Aaberge & Magne Mogstad, 2009. "On the Measurement of Long-Term Income Inequality and Income Mobility," ICER Working Papers 09-2009, ICER - International Centre for Economic Research. [Downloadable!]
  6. Alberto Alesina & Eliana La Ferrara, 2001. "Preferences for Redistribution in the Land of Opportunities," Harvard Institute of Economic Research Working Papers 1936, Harvard - Institute of Economic Research. [Downloadable!]
    Other versions:
  7. Alberto Alesina & Edward Glaeser & Bruce Sacerdote, 2001. "Why Doesn't The US Have a European-Style Welfare State?," Harvard Institute of Economic Research Working Papers 1933, Harvard - Institute of Economic Research. [Downloadable!]
  8. Alesina, Alberto F & La Ferrara, Eliana, 2002. "Preferences for Redistribution in the Land of Opportunities," CEPR Discussion Papers 3155, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  9. Antman, Francisca & McKenzie, David J., 2005. "Earnings mobility and measurement error : a pseudo-panel approach," Policy Research Working Paper Series 3745, The World Bank. [Downloadable!]
    Other versions:
  10. Tullio Jappelli & Luigi Pistaferri, 1999. "Intertemporal Choice and Consumption Mobility," CSEF Working Papers 23, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
    Other versions:
  11. Denisa Maria Sologon & Cathal O'Donoghue, 2009. "Increased Opportunity to Move up the Economic Ladder?: Earnings Mobility in EU: 1994-2001," SOEPpapers 221, DIW Berlin, The German Socio-Economic Panel (SOEP). [Downloadable!]
  12. Riener, Gerhard, 2006. "Inequality and Mobility of Household Incomes in Europe. Evidence from the ECHP," Economics Series 195, Institute for Advanced Studies. [Downloadable!]
  13. Paul Allanson, 2008. "On the characterisation and measurement of the welfare effects of income mobility from an ex-ante perspective," Discussion Papers 219, University of Dundee, Economic Studies. [Downloadable!]
  14. Irina Denisova, 2007. "Entry to and Exit from Poverty in Russia: Evidence from Longitudinal Data," Working Papers w0098, Center for Economic and Financial Research (CEFIR). [Downloadable!]
  15. Maia Güell & José V. Rodríguez Mora & Chris Telmer, 2007. "Intergenerational Mobility and the Informative Content of Surnames," CEP Discussion Papers dp0810, Centre for Economic Performance, LSE. [Downloadable!]
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  16. Valentino Dardanoni & Marcello D’Agostino, 2007. "The Measurement of Rank Mobility," Working Papers 80, ECINEQ, Society for the Study of Economic Inequality. [Downloadable!]
  17. Sologon, Denisa Maria & O'Donoghue, Cathal, 2009. "Increased Opportunity to Move Up the Economic Ladder? Earnings Mobility in EU: 1994-2001," IZA Discussion Papers 4311, Institute for the Study of Labor (IZA). [Downloadable!]
  18. Audra J. Bowlus & Jean-Marc Robin, 2002. "Twenty years of rising inequality in US lifetime labor values," Research Unit Working Papers 0105, Laboratoire d'Economie Appliquee, INRA. [Downloadable!]
  19. R. Bénabou & E. Ok, . "Mobility as Progressivity: Ranking Income Processes According to Equality of Opportunity," Princeton Economic Theory Papers 00f1, Economics Department, Princeton University.
    Other versions:
  20. Alberto Alesina & George-Marios Angeletos, 2003. "Fairness and Redistribution: U.S. versus Europe," NBER Working Papers 9502, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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