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Accounting for Individual-Specific Heterogeneity in Intergenerational Income Mobility

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Listed:
  • Yoosoon Chang
  • Steven N. Durlauf
  • Bo Hu
  • Joon Y. Park

Abstract

This paper proposes a fully nonparametric model to investigate the dynamics of intergenerational income mobility. In our model, an individual’s income class probabilities depend on parental income in a manner that accommodates nonlinearities and interactions among various individual characteristics and parental characteristics, including race, education, and parental age at childbearing. Consequently, we offer a generalization of Markov chain mobility models. We employ kernel techniques from machine learning and further regularization for estimating this highly flexible model. Utilizing data from the Panel Study of Income Dynamics (PSID), we find that race and parental education play significant roles in determining the influence of parental income on children’s economic prospects.

Suggested Citation

  • Yoosoon Chang & Steven N. Durlauf & Bo Hu & Joon Y. Park, 2024. "Accounting for Individual-Specific Heterogeneity in Intergenerational Income Mobility," Working Papers No 03/2024, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    • Handle: RePEc:bny:wpaper:0129
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    File URL: https://hdl.handle.net/11250/3120003
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