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Interpreting Trends in Intergenerational Income Mobility

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  • Nybom, Martin

    ()
    (SOFI, Stockholm University)

  • Stuhler, Jan

    ()
    (University College London)

Abstract

We examine how intergenerational income mobility responds to structural changes in a simple theoretical model of intergenerational transmission, deviating from the existing literature by explicitly analyzing the transition path between steady states. We find that mobility depends not only on current but also on past transmission mechanisms, such that changing policies, institutions or economic conditions may generate long-lasting trends. Variation in mobility levels across countries may thus be partly explained by differences in former institutions; current mobility trends may be caused by institutional changes in the past. We further find that transitions between steady states tend to be non-monotonic. Changes in the relative returns to different skills or a shift towards a less plutocratic and more meritocratic economy raise mobility initially, but also generate a negative trend over subsequent generations. Times of change thus tend to be times of high mobility, and declining mobility today may not reflect a recent deterioration of equality of opportunity but rather major improvements made in the past.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7514.

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Length: 42 pages
Date of creation: Jul 2013
Date of revision:
Handle: RePEc:iza:izadps:dp7514

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Keywords: intergenerational mobility; intergenerational income elasticity; mobility trends; steady state; transition path;

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  1. Galor, O. & Tsiddon, D., 1996. "Technological Progress, Mobility and Economic Growth," Papers 13-96, Tel Aviv.
  2. Lars Lefgren & Matthew J. Lindquist & David Sims, 2012. "Rich Dad, Smart Dad: Decomposing the Intergenerational Transmission of Income," Journal of Political Economy, University of Chicago Press, vol. 120(2), pages 268 - 303.
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  8. 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).
  9. Ermisch, John & Nicoletti, Cheti, 2005. "Intergenerational earnings mobility: changes across cohorts in Britain," ISER Working Paper Series 2005-19, Institute for Social and Economic Research.
  10. Stuhler, Jan, 2012. "Mobility Across Multiple Generations: The Iterated Regression Fallacy," IZA Discussion Papers 7072, Institute for the Study of Labor (IZA).
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  13. A. B. Atkinson & S. P. Jenkins, 1984. "The Steady-State Assumption and the Estimation of Distributional and Related Models," Journal of Human Resources, University of Wisconsin Press, vol. 19(3), pages 358-376.
  14. Jenkins, Stephen P, 1982. "Tools for the Analysis of distributional Models," The Manchester School of Economic & Social Studies, University of Manchester, vol. 50(2), pages 139-50, June.
  15. Bhashkar Mazumder, 2005. "Fortunate Sons: New Estimates of Intergenerational Mobility in the United States Using Social Security Earnings Data," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 235-255, May.
  16. Tarjei Havnes & Magne Mogstad, 2011. "No Child Left Behind: Subsidized Child Care and Children's Long-Run Outcomes," American Economic Journal: Economic Policy, American Economic Association, vol. 3(2), pages 97-129, May.
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