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Nonlinearities in Intergenerational Earnings Mobility : Consequences for Cross-Country Comparisons

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Author Info

  • Bratsberg,Bernt

    (Ragnar Frisch Centre for Economic Research)

  • Røed, Knut

    (Ragnar Frisch Centre for Economic Research)

  • Raaum, Oddbjørn

    (Ragnar Frisch Centre for Economic Research)

  • Naylor, Robin

    (University of Warwick)

  • Jäntti, Markus

    (Åbo Akademi University)

  • Eriksson, Tor

    (Aarhus School of Business)

  • Österbacka, Eva

    (Åbo Akademi University)

Abstract

We show that the patterns of intergenerational earnings mobility in Denmark, Finland, and Norway, unlike those for the US and the UK, are highly nonlinear. The Nordic relationship between log earnings of sons and fathers is flat in the lower segments of the fathers’ earnings distribution – sons growing up in the poorest households have the same adult earnings prospects as sons in moderately poor households – and is increasingly positive in middle and upper segments. This convex pattern contrasts sharply with our findings for the United States and the United Kingdom, where the relationship is much closer to being linear. As a result, cross-country comparisons of intergenerational earnings elasticities may be misleading with respect to transmission mechanisms in the central parts of the earnings distribution, and uninformative in the tails of the distribution.

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Bibliographic Info

Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 782.

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Length: 35 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:wrk:warwec:782

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