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In Search of Intergenerational Credit Constraints Among Canadian Men: Quantile Versus Mean Regression Tests for Binding Credit Constraints

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  • Grawe, Nathan D.

Abstract

Several recent papers have cited non-linearities in the relationship between incomes of parents and their children as evidence of important intergenerational credit constraints. This paper argues that any pattern in the conditional expectation function can be justified by a properly constructed story with credit constraints. This raises questions about the validity of the approach. Quantile regressions provide an alternative test. Using data from Canadian tax files, this paper finds results contrary to the credit constraints hypothesis; the non-linearities in the regression function are driven by the low-ability (unconstrained) sons rather than high-ability (presumably constrained) sons.

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Bibliographic Info

Paper provided by Statistics Canada, Analytical Studies Branch in its series Analytical Studies Branch Research Paper Series with number 2001158e.

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Date of creation: 30 Jan 2001
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Handle: RePEc:stc:stcp3e:2001158e

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Related research

Keywords: Household; family and personal income; Income; pensions; spending and wealth; Labour; Wages; salaries and other earnings;

References

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  1. Peters, H Elizabeth, 1992. "Patterns of Intergenerational Mobility in Income and Earnings," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 456-66, August.
  2. Eric R. Eide & Mark H. Showalter, 1999. "Factors Affecting the Transmission of Earnings across Generations: A Quantile Regression Approach," Journal of Human Resources, University of Wisconsin Press, vol. 34(2), pages 253-267.
  3. Gary S. Becker & Nigel Tomes, 1994. "Human Capital and the Rise and Fall of Families," NBER Chapters, in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 257-298 National Bureau of Economic Research, Inc.
  4. Kenneth A. Couch & Thomas A. Dunn, 1995. "Intergenerational Correlations in Labor Market Status: A Comparison of the United States and Germany," Discussion Papers of DIW Berlin 111, DIW Berlin, German Institute for Economic Research.
  5. Bergstrom, Theodore C, 1989. "A Fresh Look at the Rotten Kid Theorem--and Other Household Mysteries," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1138-59, October.
  6. Behrman, Jere R & Taubman, Paul, 1990. "The Intergenerational Correlation between Children's Adult Earnings and Their Parents' Income: Result from the Michigan Panel Survey of Income Dynamics," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 36(2), pages 115-27, June.
  7. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
  8. Zimmerman, David J, 1992. "Regression toward Mediocrity in Economic Stature," American Economic Review, American Economic Association, vol. 82(3), pages 409-29, June.
  9. Heisz, Andrew & Corak, Miles, 1996. "The Intergenerational Income Mobility of Canadian Men," Analytical Studies Branch Research Paper Series 1996089e, Statistics Canada, Analytical Studies Branch.
  10. Grawe, Nathan D., 2003. "Life Cycle Bias in the Estimation of Intergenerational Earnings Persistence," Analytical Studies Branch Research Paper Series 2003207e, Statistics Canada, Analytical Studies Branch.
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Citations

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Cited by:
  1. Corak, Miles, 2001. "Are the Kids All Right? Intergenerational Mobility and Child Well-being in Canada," Analytical Studies Branch Research Paper Series 2001171e, Statistics Canada, Analytical Studies Branch.
  2. Lena Lindahl, 2008. "Do birth order and family size matter for intergenerational income mobility? Evidence from Sweden," Applied Economics, Taylor & Francis Journals, vol. 40(17), pages 2239-2257.
  3. Corak, Miles, 2001. "Les enfants se portent-ils bien ? Mobilite intergenerationnelle et bien-etre de l'enfant au Canada," Direction des etudes analytiques : documents de recherche 2001171f, Statistics Canada, Direction des etudes analytiques.
  4. 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.

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