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Human Capital, Heterogeneity, and Estimated Degrees of Intergenerational Mobility

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  • Song Han
  • Casey B. Mulligan

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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Publication status: published as Han, Song and Casey B. Mulligan. "Human Capital, Heterogeneity And Estimated Degrees Of Intergenerational Mobility," Economic Journal, 2001, v111(470,Apr), 207-243.
Handle: RePEc:nbr:nberwo:7678

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  1. Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1992. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," American Economic Review, American Economic Association, vol. 82(5), pages 1177-98, December.
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