A Very Uneven Playing Field: Economic Mobility in the United States

We present results from a new data set, the Statistics of Income Mobility Panel, that has been assembled from tax and other administrative sources to provide evidence on economic mobility and persistence in the United States. This data set allows us to take on the methodological problems that have complicated previous efforts to estimate intergenerational earnings and income elasticities. We find that the elasticities for women's income, men's income, and men's earnings are as high as all but the highest of the previously reported survey-based estimates. Because the intergenerational curves are especially steep within the parental-income region defined by the 50th to 90th percentiles, approximately two-thirds of the inequality between poor and well-off families is passed on to the next generation. This extreme persistence cannot be attributed to any single factor. Instead, the U.S. is exceptional with respect to virtually all factors governing economic persistence, including the returns to human capital, the amount of public investment in the human capital of low-income children, the amount of socioeconomic segregation, and the progressiveness of the tax-and-transfer system. For each of these four factors, the U.S. has opted for policies that are mobility-reducing, with the implication that any substantial increase in mobility will likely require a wide-ranging package of reforms that cut across many institutions.