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What the Mean Measures of Mobility Miss : Learning About Intergenerational Mobilityfrom Conditional Variance

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  • Ahsan,Md. Nazmul
  • Emran, M. Shahe
  • Jiang,Hanchen
  • Shilpi,Forhad J.

Abstract

To understand the role of family background in intergenerational mobility, a large literaturehas focused on the conditional mean of children's economic outcomes given parent's economic status, whileignoring the information contained in conditional variance. This paper explores the effects of family background on theconditional variance of children's outcomes in the context of intergenerational educational mobility using datafrom three large developing countries (China, India, and Indonesia). The empirical analysis uses exceptionally richdata free of sample truncation because of the nonresident children at the time of the survey. Evidence from all threecountries suggests a strong influence of father's education on the conditional variance of children'sschooling. The analysis finds substantial heterogeneity across countries, gender, and geography (rural/urban).Cohort-based estimates suggest that the effects of father's education on the conditional variance havechanged qualitatively; in some cases, a positive effect in the 1950s cohort turns into a substantial negative effect inthe 1980s cohort. A methodology is developed to incorporate the effects of family background on the conditional variancealong with the standard conditional mean effects. This paper derives risk-adjusted measures of relative and absolutemobility by accounting for an estimate of the risk premium for the conditional variance faced by a child. The estimatesof risk-adjusted relative and absolute mobility for China, India, and Indonesia suggest that the existing evidenceusing the standard measures of mobility substantially underestimates the effects of family background onchildren's educational opportunities, and thus gives a false impression of high educational mobility. The magnitudeof underestimation is especially large for the children born into the most disadvantaged households where fathers have noschooling, while it is negligible for the children of college educated fathers. The standard (but partial)measures may lead to an incorrect ranking of regions and groups in terms of relative mobility. Compared to therisk-adjusted measures, the standard measures are likely to underestimate the gender gap and rural-urban gap ineducational opportunities.

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  • Ahsan,Md. Nazmul & Emran, M. Shahe & Jiang,Hanchen & Shilpi,Forhad J., 2022. "What the Mean Measures of Mobility Miss : Learning About Intergenerational Mobilityfrom Conditional Variance," Policy Research Working Paper Series 10074, The World Bank.
    • Handle: RePEc:wbk:wbrwps:10074
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    More about this item

    JEL classification:

    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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