Reconsidering the Use of Nonlinearities in Intergenerational Earnings Mobility as a Test for Credit Constraints
Intergenerational earnings regression among Canadian men is nonlinear; middle-earning families experience slower regression. This pattern appears to confirm economic models of educational choice with credit constraints. This paper reexamines the economic model and finds no connection between credit markets and earnings regression nonlinearities. In particular, credit constraints need not produce concavity and concavity does not imply credit market failure. Despite the invalidity of the test, data availability will likely lead to continued research along this path. The paper proposes an amended test using quantile regressions. Applied to Canadian data, the simple liquidity constraint conclusion is rejected.
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.:
- Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
- Becker, Gary S, 1989. "On the Economics of the Family: Reply to a Skeptic," American Economic Review, American Economic Association, vol. 79(3), pages 514-18, June.
When requesting a correction, please mention this item's handle: RePEc:uwp:jhriss:v:39:y:2004:i:3:p813-827. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.