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The Changing Effect of Family Background on the Incomes of American Adults

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  • Harding, David J.

    (Harvard U)

  • Jencks, Christopher

    (Harvard U)

  • Lopoo, Leonard M.

    (Syracuse U)

  • Mayer, Susan E.

    (U of Chicago)

Abstract

We analyze changes in the determinants of family income between 1961 and 1999, focusing on the effect of parental education, occupational rank, income, marital status, family size, region of residence, race, and ethnicity. Our data, which cover respondents between the ages of thirty and fifty-nine, come from two Occupational Changes in a Generation surveys, the General Social Survey, and the Panel Study of Income Dynamics. The multiple correlation between respondents’ family income and their parents’ characteristics fell between 1961 to 1999. During the 1960s the overall dispersion of respondents’ family incomes also fell, so the income gap between respondents from advantaged and disadvantaged families narrowed dramatically. During the 1970s, 1980s, and 1990s the overall dispersion of respondents’ family income rose again. But because the correlation between respondents’ family income and their parents’ characteristics was still falling, the income gap between respondents from advantaged and disadvantaged families showed no consistent trend. All else equal, the economic cost of being Black, Hispanic, or born in the South fell between 1961 and 1999. The cost of having a parent who worked in an unskilled rather than a skilled occupation fell between 1961 and 1972 but not after that. Indeed, occupational inequality among parents has probably become more important since 1972. Neither the effect of parental education nor the effect of parental income changed significantly during the years for which we have data. Daughters were considerably less mobile than sons in the 1970s, but this difference diminished in the 1980s and 1990s. Respondents with parents in the bottom quarter of the socioeconomic distribution were more likely to remain in their quartile of origin than respondents with parents in the top quarter of the distribution. We conclude by arguing that while both justice and economic efficiency require a significant amount of exchange mobility, neither justice nor efficiency implies that the correlation between family income and parental advantages ought to be zero. The case for programs that seek to reduce intergenerational inheritance depends on whether they reduce poverty and inequality.

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Bibliographic Info

Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp03-045.

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Date of creation: Nov 2003
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Handle: RePEc:ecl:harjfk:rwp03-045

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  1. Kotlikoff, Laurence J & Summers, Lawrence H, 1981. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 706-32, August.
  2. William G. Gale & John Karl Scholz, 1991. "Intergenerational Transfers and the Accumulation of Wealth," UCLA Economics Working Papers 624, UCLA Department of Economics.
  3. Orley Ashenfelter & Cecilia Rouse, 1998. "Income, Schooling, And Ability: Evidence From A New Sample Of Identical Twins," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 253-284, February.
  4. David Grusky & Thomas DiPrete, 1990. "Recent trends in the process of stratification," Demography, Springer, vol. 27(4), pages 617-637, November.
  5. Susan E. Mayer & Leonard Michael Lopoo, 2001. "Has the Intergenerational Transmission of Economic Status Changed?," JCPR Working Papers 227, Northwestern University/University of Chicago Joint Center for Poverty Research.
  6. Heisz, Andrew & Corak, Miles, 1998. "The Intergenerational Earnings and Income Mobility of Canadian Men: Evidence from Longitudinal Income Tax Data," Analytical Studies Branch Research Paper Series 1998113e, Statistics Canada, Analytical Studies Branch.
  7. Taubman, Paul, 1976. "The Determinants of Earnings: Genetics, Family, and Other Environments; A Study of White Male Twins," American Economic Review, American Economic Association, vol. 66(5), pages 858-70, December.
  8. Gary Solon, 2002. "Cross-Country Differences in Intergenerational Earnings Mobility," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 59-66, Summer.
  9. Joseph G. Altonji & Thomas A. Dunn, 1994. "An Intergenerational Model of Wages, Hours and Earnings," NBER Working Papers 4950, National Bureau of Economic Research, Inc.
  10. Jencks, Christopher & Mayer, Susan E. & Swingle, Joseph, 2004. "Who Has Benefited from Economic Growth in the United States Since 1969? The Case of Children," Working Paper Series rwp04-017, Harvard University, John F. Kennedy School of Government.
  11. David I. Levine & Bhashkar Mazumder, 2002. "Choosing the right parents: changes in the intergenerational transmission of inequality between 1980 and the early 1990s," Working Paper Series WP-02-08, Federal Reserve Bank of Chicago.
  12. Francine D. Blau & Lawrence Kahn, 2004. "Do Cognitive Test Scores Explain Higher U.S. Wage Inequality?," CESifo Working Paper Series 1139, CESifo Group Munich.
  13. Levine, D.I., 1999. "Choosing the Right Parents: Changes in the Intergenerational Transmission of Inequality Between the 1970s and the Early 1990s," Papers 72, California Berkeley - Institute of Industrial Relations.
  14. Solon, Gary, 1999. "Intergenerational mobility in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 29, pages 1761-1800 Elsevier.
  15. Robert A. Margo, 1999. "The History of Wage Inequality in America, 1820 to 1970," Economics Working Paper Archive wp_286, Levy Economics Institute.
  16. Stefano Scarpetta & Andrea Bassanini & Dirk Pilat & Paul Schreyer, 2000. "Economic Growth in the OECD Area: Recent Trends at the Aggregate and Sectoral Level," OECD Economics Department Working Papers 248, OECD Publishing.
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Citations

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Cited by:
  1. Brian Nolan & Gosta Esping-Andersen & Christopher T. Whelan & Bertrand Maitre, 2010. "The Role of Social Institutions in Inter-Generational Mobility," Working Papers 201018, Geary Institute, University College Dublin.
  2. Angela R. Fertig, 2004. "Is Intergenerational Earnings Mobility Affected by Divorce?," Working Papers 953, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Research on Child Wellbeing..
  3. Marianne Hansen, 2010. "Change in intergenerational economic mobility in Norway: conventional versus joint classifications of economic origin," Journal of Economic Inequality, Springer, vol. 8(2), pages 133-151, June.
  4. Lane Kenworthy & Timothy Smeeding, 2013. "GINI Country Report: Growing Inequalities and their Impacts in the United States," GINI Country Reports united_states, AIAS, Amsterdam Institute for Advanced Labour Studies.
  5. Hyytinen, Ari & Ilmakunnas, Pekka & Johansson, Edvard & Toivanen, Otto, 2013. "Heritability of Lifetime Income," MPRA Paper 46326, University Library of Munich, Germany.
  6. Sato, Hiroshi & Li, Shi, 2007. "Revolution and Family in Rural China: Influence of Family Background on Current Family Wealth," IZA Discussion Papers 3223, Institute for the Study of Labor (IZA).
  7. Sato, Hiroshi & Li, Shi, 2013. "Influence Of Family Background On Current Family Wealth In Rural China," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 54(1), pages 95-117, June.

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