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Choosing the right parents: changes in the intergenerational transmission of inequality between 1980 and the early 1990s

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David I. Levine
Bhashkar Mazumder

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Abstract

This paper uses the National Longitudinal Surveys (NLS), the Panel Study of Income Dynamics (PSID), and the General Social Survey (GSS) to measure the elasticity of family income on men’s adult earnings in 1980 and the early 1990s. The study finds a large and statistically significant increase in the importance of family income over time when comparing cohorts in the NLS, a dataset that has not been previously used for this purpose. We also find a large but statistically insignificant increase when using the GSS. The PSID, however, shows a large but statistically insignificant decline in this parameter. The results imply that changes in the effect of family income did not operate through the channel of human capital. Results suggest that the rate of inheritability of income may have increased in recent decades, but this evidence is not yet definitive. Researchers, therefore, should exercise caution when generalizing about trends over time when using small samples from just one dataset such as the PSID.

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Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-02-08.

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Date of creation: 2002
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Handle: RePEc:fip:fedhwp:wp-02-08

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Keywords: Income

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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.:
  1. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September. [Downloadable!] (restricted)
  2. Behrman, Jere & Tarbman, Paul, 1985. "Intergenerational Earnings Mobility in the United States: Some Estimates and a Test of Becker's Intergenerational Endowments Model," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 144-51, February. [Downloadable!] (restricted)
  3. Murphy, Kevin M & Welch, Finis, 1992. "The Structure of Wages," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 285-326, February. [Downloadable!] (restricted)
  4. Solon, Gary, 1989. "Biases in the Estimation of Intergenerational Earnings Correlations," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 172-74, February. [Downloadable!] (restricted)
  5. Corak, Miles & Heisz, Andrew, 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. [Downloadable!]
  6. Goldberger, Arthur S, 1989. "Economic and Mechanical Models of Intergenerational Transmission," American Economic Review, American Economic Association, vol. 79(3), pages 504-13, June. [Downloadable!] (restricted)
  7. Shea, John, 2000. "Does parents' money matter?," Journal of Public Economics, Elsevier, vol. 77(2), pages 155-184, August. [Downloadable!] (restricted)
  8. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June. [Downloadable!] (restricted)
  9. Joseph G. Altonji & Thomas A. Dunn, 1991. "Relationships Among the Family Incomes and Labor Market Outcomes of Relatives," NBER Working Papers 3724, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Bhashkar Mazumder, 2001. "Earnings mobility in the US: a new look at intergenerational inequality," Working Paper Series WP-01-18, Federal Reserve Bank of Chicago. [Downloadable!]
  11. Peters, H Elizabeth, 1992. "Patterns of Intergenerational Mobility in Income and Earnings," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 456-66, August. [Downloadable!] (restricted)
  12. Bowles, Samuel, 1972. "Schooling and Inequality from Generation to Generation," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages S219-S51, Part II, . [Downloadable!] (restricted)
  13. Goldberger, A.S., 1989. "Economic And Mechanical Models Of Intergenerational Transmission," Working papers 374, Wisconsin Madison - Social Systems.
  14. Menchik, Paul L, 1979. "Inter-generational Transmission of Inequality: An Empirical Study of Wealth Mobility," Economica, London School of Economics and Political Science, vol. 46(184), pages 349-62, November. [Downloadable!] (restricted)
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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. Sari Pekkala & Robert E.B. Lucas, 2005. "On the Importance of Finnishing School: Half a Century of Inter-generational Economic Mobility in Finland," VATT Discussion Papers 359, Government Institute for Economic Research (VATT). [Downloadable!]
    Other versions:
  2. Markus Jäntti & Bernt Bratsberg & Knut Røed & Oddbjørn Raaum & Robin Naylor & Eva Österbacka & Anders Björklund & Tor Eriksson, 2006. "American Exceptionalism in a New Light: A Comparison of Intergenerational Earnings Mobility in the Nordic Countries, the United Kingdom and the United States," IZA Discussion Papers 1938, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. David I. Levine & Bhashkar Mazumder, 2003. "The growing importance of family and community: an analysis of changes in the sibling correlation in earnings," Working Paper Series WP-03-24, Federal Reserve Bank of Chicago. [Downloadable!]
  4. Bhashkar Mazumder, 2004. "Sibling similarities, differences and economic inequality," Working Paper Series WP-04-13, Federal Reserve Bank of Chicago. [Downloadable!]
  5. Miles Corak, 2006. "Do Poor Children Become Poor Adults? Lessons from a Cross Country Comparison of Generational Earnings Mobility," IZA Discussion Papers 1993, Institute for the Study of Labor (IZA). [Downloadable!]
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