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The Political Economy of Intergenerational Income Mobility

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  • Ichino, Andrea

    ()
    (European University Institute)

  • Karabarbounis, Loukas

    ()
    (Harvard University)

  • Moretti, Enrico

    ()
    (University of California, Berkeley)

Abstract

The intergenerational elasticity of income is considered one of the best measures of the degree to which a society gives equal opportunity to its members. While much research has been devoted to measuring this reduced-form parameter, less is known about its underlying structural determinants. Using a model with exogenous talent endowments, endogenous parental investment in children and endogenous redistributive institutions, we identify the structural parameters that govern the intergenerational elasticity of income. The model clarifies how the interaction between private and collective decisions determines the equilibrium level of social mobility. Two societies with similar economic and biological fundamentals may have vastly different degrees of intergenerational mobility depending on their political institutions. We offer empirical evidence in line with the predictions of the model. We conclude that international comparisons of intergenerational elasticity of income are not particularly informative about fairness without taking into account differences in politico-economic institutions.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4767.

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Length: 46 pages
Date of creation: Feb 2010
Date of revision:
Publication status: published in: Economic Inquiry, 2011, 49 (1), 47 - 69
Handle: RePEc:iza:izadps:dp4767

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Keywords: political institutions; intergenerational mobility; public education;

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Cited by:
  1. Nathalie Chusseau & Joel Hellier, 2012. "Education, Intergenerational Mobility and Inequality," Working Papers 261, ECINEQ, Society for the Study of Economic Inequality.
  2. Sajid Amin Javed & Mohammad Irfan, 2012. "Intergenerational Mobility: Evidence from Pakistan Panel Household Survey," Poverty and Social Dynamics Paper Series 2012:05, Pakistan Institute of Development Economics.
  3. Tetsuo Ono, 2012. "Inequality Dynamics and the Politics of Redistribution," Discussion Papers in Economics and Business 12-09-Rev, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Nov 2013.
  4. Ryo Arawatari & Tetsuo Ono, 2009. "Inequality, Mobility and Redistributive Politics," Discussion Papers in Economics and Business 09-12-Rev.2, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Feb 2010.
  5. Ada Ferrer-i-carbonell & X. Ramos & M. Oviedo, 2013. "GINI Country Report: Growing Inequalities and their Impacts in Spain," GINI Country Reports, AIAS, Amsterdam Institute for Advanced Labour Studies spain, AIAS, Amsterdam Institute for Advanced Labour Studies.
  6. Ryo Arawatari & Tetsuo Ono, 2009. "Inequality, Mobility and Redistributive Taxation in a Finance-constrained Economy," Discussion Papers in Economics and Business 09-28, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  7. Bernasconi, Michele & Profeta, Paola, 2012. "Public education and redistribution when talents are mismatched," European Economic Review, Elsevier, Elsevier, vol. 56(1), pages 84-96.

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