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Quantifying the Role of Firms in Intergenerational Mobility

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  • Caue Dobbin
  • Tom Zohar

Abstract

We investigate the role of firms in intergenerational mobility by decomposing the intergenerational elasticity of earnings (IGE) into firm-IGE and individual-IGE using a two-way fixed effects framework. Using data from Israel, we find that the firm component is responsible for 22% of the overall IGE. We then explore potential mechanisms and find that education differences explain a large share of the individual-IGE, while place of residence and demographics are more important for the firm-IGE. Guided by these empirical patterns, we develop a novel method to estimate the role of skill-based sorting and find that it accounts for approximately half of the firm-IGE. Our results provide evidence that the intergenerational transmission of earnings encompasses more than just human capital, and highlight the importance of promoting equal access to high-paying firms and reducing labor market segregation in efforts to enhance equality of opportunity.

Suggested Citation

  • Caue Dobbin & Tom Zohar, 2023. "Quantifying the Role of Firms in Intergenerational Mobility," CESifo Working Paper Series 10758, CESifo.
    • Handle: RePEc:ces:ceswps:_10758
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    References listed on IDEAS

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    Cited by:

    1. Bonacini, Luca & Patriarca, Fabrizio & Santoni, Edoardo, 2025. "Background wage premia, beyond education: Firm sorting and unobserved abilities of graduates," Economics of Education Review, Elsevier, vol. 109(C).

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    More about this item

    Keywords

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    JEL classification:

    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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