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Human Capital, Heterogeneity, and Estimated Degrees of Intergenerational Mobility

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Song Han
Casey B. Mulligan

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Abstract

Some of the important implications of the parental investment model of intergenerational mobility have been derived under the assumption that parental income is the main source of heterogeneity. We explicitly model the variability and inheritability of innate' earnings ability and the variability of tastes, showing how they affect observed degrees of intergenerational consumption and earnings mobility. Heterogeneity increases the difficulty of detecting the existence of borrowing constrained families. Conversely, the presence of heterogeneity means that economic and linear statistical models of inheritance generate similar intergenerational data on consumption and earnings. In this sense, our findings offer some support for Goldberger's (1989) criticism of human capital models of inheritance. Finally, we suggest that any cross-country differences in intergenerational earnings mobility are more readily interpreted according to the heterogeneity of inherited ability, rather than optimal family responses to country-specific institutions for accumulating human capital.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7678.

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Date of creation: Apr 2000
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Handle: RePEc:nbr:nberwo:7678

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Find related papers by JEL classification:
J62 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Job, Occupational and Intergenerational Mobility; Promotion
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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  2. Joseph G. Altonji & Fumio Hayashi & Laurence J. Kotlikoff, 1993. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," NBER Working Papers 3046, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Robert E. Hall, 1988. "Intertemporal Substitution in Consumption," NBER Working Papers 0720, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Donal O'Neill & Olive Sweetman & Dirk van de Gaer, 2002. "Consequences of Specification Error for Distributional Analysis with an Application to Intergenerational Mobility," Economics, Finance and Accounting Department Working Paper Series n1110102, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth. [Downloadable!]
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  2. repec:ese:iserwp: is not listed on IDEAS
  3. Sheng Guo, 2009. "Rich Dad, Rich Kid? Switching Regression Estimates of Intergenerational Mobility of Consumption," Working Papers 0904, Florida International University, Department of Economics. [Downloadable!]
  4. Kerwin Kofi Charles & Erik Hurst, 2002. "The Correlation of Welath Across Generations," NBER Working Papers 9314, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Ermisch, John & Francesconi, Marco, 2002. "Intergenerational Social Mobility and Assortative Mating in Britain," IZA Discussion Papers 465, Institute for the Study of Labor (IZA). [Downloadable!]
  6. Sebastian Barnes & Garry Young, . "The rise in US household debt: assessing its causes and sustainability," Bank of England working papers 206, Bank of England. [Downloadable!]
  7. Nathan D. Grawe & Casey B. Mulligan, 2002. "Economic Interpretations of Intergenerational Correlations," NBER Working Papers 8948, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Jason Long & Joseph Ferrie, 2005. "A Tale of Two Labor Markets: Intergenerational Occupational Mobility in Britain and the U.S. Since 1850," NBER Working Papers 11253, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Philipp Bauer & Regina T. Riphahn, 2005. "Heterogeneity in the Intergenerational Transmission of Educational Attainment: Evidence from Switzerland on Natives and Second Generation Immigrants," cege – Center for European, Governance and Economic Development Research Discussion Papers 38, cege – Center for European, Governance and Economic Development Research, University of Goettingen (Germany).. [Downloadable!]
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  10. Jorge N. Valero-Gil & Jose A. Tijerina-Guajardo, 2002. "Effects of Education on the Intergenerational Transmission of Labor Income in Mexico," Eastern Economic Journal, Eastern Economic Association, vol. 28(3), pages 381-392, Summer. [Downloadable!]
  11. Nathan Grawe, 2008. "The quality–quantity trade-off in fertility across parent earnings levels: a test for credit market failure," Review of Economics of the Household, Springer, vol. 6(1), pages 29-45, March. [Downloadable!] (restricted)
  12. Nguyen, Anh & Getinet, Haile, 2003. "Intergenerational mobility in educational and occupational status: evidence from the U.S," MPRA Paper 1383, University Library of Munich, Germany. [Downloadable!]
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  13. Ramses Abul Naga, 2008. "Biases of the ordinary least squares and instrumental variables estimators of the intergenerational earnings elasticity: Revisited in the light of panel data," Journal of Economic Inequality, Springer, vol. 6(4), pages 323-350, December. [Downloadable!] (restricted)
  14. Fernando A. Veloso & Sérgio Guimarães Ferreira, 2003. "Mobilidade Intergeracional de Educação no Brasil," Anais do XXXI Encontro Nacional de Economia [Proceedings of the 31th Brazilian Economics Meeting] f25, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
  15. Bratsberg,Bernt & Røed, Knut & Raaum, Oddbjørn & Naylor, Robin & Jäntti, Markus & Eriksson, Tor & Österbacka, Eva, 2007. "Nonlinearities in Intergenerational Earnings Mobility : Consequences for Cross-Country Comparisons," The Warwick Economics Research Paper Series (TWERPS) 782, University of Warwick, Department of Economics. [Downloadable!]
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