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Rich Dad, Rich Kid? Switching Regression Estimates of Intergenerational Mobility of Consumption

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Author Info
Sheng Guo () (Department of Economics, Florida International University)

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Abstract

Theory suggests that intergenerational financial transfer is the indicator of whether a family is borrowing-constrained in financing its children’s human capital investments. Yet measurement error in financial transfer would generate misclassification error between the constrained and unconstrained groups. By employing the switching regressions with imperfect sample separation to correct for this misclassification error, we show that the intergenerational mobility of consumption for constrained families is much less than unconstrained families, contradictory to what the theory implies. The results are robust to choices of proxy variables as well as cut-o s to divide the sample.

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File URL: http://www.fiu.edu/orgs/economics/wp2009/09-04.pdf
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File Function: First version, 2009
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Paper provided by Florida International University, Department of Economics in its series Working Papers with number 0904.

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Length: 43 pages
Date of creation: Feb 2009
Date of revision:
Handle: RePEc:fiu:wpaper:0904

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