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Rich Dad, Smart Dad: Decomposing the Intergenerational Transmission of Income

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Author Info

  • Lefgren, Lars

    ()
    (Brigham Young University)

  • Lindquist, Matthew

    ()
    (Dept. of Economics, Stockholm University)

  • Sims, David

    ()
    (Brigham Young University)

Abstract

We construct a simple model, consistent with Becker and Tomes (1979), that decomposes the intergenerational income elasticity into the causal effect of financial resources, the mechanistic transmission of human capital, and the role that human capital plays in the determination of father’s permanent income. We show how a particular set of instrumental variables could separately identify the money and human capital transmission effects. We further outline two instrumental variables methods for bounding the structural parameters of our model in the presence of imperfect instruments. Using data from a thirty-five percent sample of Swedish sons and their fathers, we show that only a minority of the intergenerational income elasticity can be plausibly attributed to the causal effect of fathers’ financial resources.

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Bibliographic Info

Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2009:19.

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Length: 41 pages
Date of creation: 10 Dec 2009
Date of revision:
Handle: RePEc:hhs:sunrpe:2009_0019

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Keywords: financial resources; human capital; intergenerational income elasticity; intergenerational mobility; permanent income;

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References

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  1. Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1153-89, December.
  2. Arild Aakvik & Kjell G. Salvanes & Kjell Vaage, 2005. "Educational Attainment and Family Background," German Economic Review, Verein für Socialpolitik, vol. 6(3), pages 377-394, 08.
  3. Bjorklund, Anders & Jantti, Markus, 1997. "Intergenerational Income Mobility in Sweden Compared to the United States," American Economic Review, American Economic Association, vol. 87(5), pages 1009-18, December.
  4. Gary S. Becker & Nigel Tomes, . "Human Capital and the Rise and Fall of Families," University of Chicago - Population Research Center 84-10, Chicago - Population Research Center.
  5. Anders Bjorklund & Markus Jantti & Gary Solon, 2007. "Nature and Nurture in the Intergenerational Transmission of Socioeconomic Status: Evidence from Swedish Children and Their Biological and Rearing Parents," NBER Working Papers 12985, National Bureau of Economic Research, Inc.
  6. Bjorklund, Anders & Chadwick, Laura, 2003. "Intergenerational income mobility in permanent and separated families," Economics Letters, Elsevier, vol. 80(2), pages 239-246, August.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. ¿Qué es Mejor para mi Hijo: Mi Dinero o Mi Cerebro?
    by Alejandro Villagomez in Tintero Económico Diario on 2012-07-17 03:25:00
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Cited by:
  1. Tor Eriksson & Jay Pan & Xuezheng Qin, 2013. "The Intergenerational Inequality of Health in China," Economics Working Papers 2013-21, School of Economics and Management, University of Aarhus.
  2. Mikael Lindahl & M�rten Palme & Sofia Sandgren-Massih & Anna Sj�gren, 2014. "A Test of the Becker-Tomes Model of Human Capital Transmission Using Microdata on Four Generations," Journal of Human Capital, University of Chicago Press, vol. 8(1), pages 80 - 96.
  3. Lindahl, Mikael & Palme, Mårten & Sandgren Massih, Sofia & Sjögren, Anna, 2012. "The Intergenerational Persistence of Human Capital: An Empirical Analysis of Four Generations," IZA Discussion Papers 6463, Institute for the Study of Labor (IZA).
  4. Cardak, Buly A. & Johnston, David W. & Martin, Vance L., 2013. "Intergenerational earnings mobility: A new decomposition of investment and endowment effects," Labour Economics, Elsevier, vol. 24(C), pages 39-47.
  5. Nybom, Martin & Stuhler, Jan, 2014. "Interpreting Trends in Intergenerational Mobility," Working Paper Series 3/2014, Swedish Institute for Social Research.
  6. Montserrat Vilalta-Bufi(Universitat de Barcelona) & Ausias Ribo (Universitat de Barcelona), 2012. "Educational expansion, intergenerational mobility and over-education," Working Papers in Economics 284, Universitat de Barcelona. Espai de Recerca en Economia.
  7. Tamura, Robert & Dwyer, Gerald P. & Devereux, John & Baier, Scott, 2012. "Economic growth In the long run," MPRA Paper 41324, University Library of Munich, Germany.
  8. Lindahl, Mikael & Palme, Mårten & Sandgren Massih, Sofia & Sjögren, Anna, 2013. "Long-term intergenerational persistence of human capital: an empirical analysis of four generations," Research Papers in Economics 2013:3, Stockholm University, Department of Economics.
  9. Nybom, Martin & Stuhler, Jan, 2013. "Interpreting Trends in Intergenerational Income Mobility," IZA Discussion Papers 7514, Institute for the Study of Labor (IZA).

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