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Alike in Many Ways: Intergenerational and Sibling Correlations of Brothers' Earnings

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  • Bingley, Paul

    ()
    (SFI - Danish National Centre for Social Research)

  • Cappellari, Lorenzo

    ()
    (Università Cattolica del Sacro Cuore)

Abstract

We model the correlations of brothers' life-cycle earnings separating for the first time the effect of paternal earnings from additional residual sibling effects. We identify the two effects by analysing sibling correlations and intergenerational correlations jointly within a unified framework. Our multi-person model of earnings dynamics distinguishes permanent earnings from transitory – serially correlated – shocks, allows for life-cycle effects and nests the models of previous research that have focussed either on intergenerational or sibling correlations. Using data on the Danish population of father/first-son/second-son triplets we find that sibling effects explain between one fourth and one half of inequality in life-cycle earnings, and largely account for individual differences in earnings growth. Intergenerational associations account for a considerable share of overall sibling correlations, between 30 and 60 per cent from youth to maturity. We also find that transitory shocks are correlated across family members, in particular between brothers. Extensions of the model show a distinctive effect of mothers' human capital on top of fathers' earnings and no evidence of differential intergenerational transmission between brothers.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6987.

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Length: 45 pages
Date of creation: Nov 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6987

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Keywords: intergenerational transmission; sibling correlations; life-cycle earnings;

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  1. Paul Bingley & Lorenzo Cappellari & Niels Westergård‐Nielsen, 2013. "Unemployment Insurance, Wage Dynamics and Inequality Over the Life Cycle," Economic Journal, Royal Economic Society, vol. 0, pages 341-372, 05.
  2. Björklund Anders & Lindahl Lena & Lindquist Matthew J., 2010. "What More Than Parental Income, Education and Occupation? An Exploration of What Swedish Siblings Get from Their Parents," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-40, November.
  3. Øivind Anti Nilsen & Kjell Vaage & Arild Aakvik & Karl Jacobsen, 2012. "Intergenerational Earnings Mobility Revisited: Estimates Based on Lifetime Earnings," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(1), pages 1-23, 03.
  4. Björklund, Anders & Jäntti, Markus & Lindquist, Matthew J., 2009. "Family background and income during the rise of the welfare state: Brother correlations in income for Swedish men born 1932-1968," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 671-680, June.
  5. Grawe, Nathan D., 2006. "Lifecycle bias in estimates of intergenerational earnings persistence," Labour Economics, Elsevier, vol. 13(5), pages 551-570, October.
  6. Anders Bohlmark & Matthew J. Lindquist, 2006. "Life-Cycle Variations in the Association between Current and Lifetime Income: Replication and Extension for Sweden," Journal of Labor Economics, University of Chicago Press, vol. 24(4), pages 879-900, October.
  7. Nybom, Martin & Stuhler, Jan, 2011. "Heterogeneous Income Profiles and Life-Cycle Bias in Intergenerational Mobility Estimation," IZA Discussion Papers 5697, Institute for the Study of Labor (IZA).
  8. Ostrovsky, Yuri, 2012. "The correlation of spouses' permanent and transitory earnings and family earnings inequality in Canada," Labour Economics, Elsevier, vol. 19(5), pages 756-768.
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