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Alike in Many Ways: Intergenerational and Sibling Correlations of Brothers' Earnings

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  • Paul Bingley
  • Lorenzo Cappellari

Abstract

We model the correlations of brothers’ life-cycle earnings separating for the first time the effect of paternal earnings from additional residual sibling effects. We identify the two effects by analysing sibling correlations and intergenerational correlations jointly within a unified framework. Our multi-person model of earnings dynamics distinguishes permanent earnings from transitory –serially correlated—shocks, allows for life-cycle effects and nests the models of previous research that have focussed either on intergenerational or sibling correlations. Using data on the Danish population of father/first-son/second-son triplets we find that sibling effects explain between one fourth and one half of inequality in life-cycle earnings, and largely account for individual differences in earnings growth. Intergenerational associations account for a considerable share of overall sibling correlations, between 30 and 60 per cent from youth to maturity. We also find that transitory shocks are correlated across family members, in particular between brothers. Extensions of the model show a distinctive effect of mothers’ human capital on top of fathers’ earnings and no evidence of differential intergenerational transmission between brothers.

Suggested Citation

  • Paul Bingley & Lorenzo Cappellari, 2012. "Alike in Many Ways: Intergenerational and Sibling Correlations of Brothers' Earnings," CESifo Working Paper Series 3994, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3994
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    References listed on IDEAS

    as
    1. Martin Nybom & Jan Stuhler, 2016. "Heterogeneous Income Profiles and Lifecycle Bias in Intergenerational Mobility Estimation," Journal of Human Resources, University of Wisconsin Press, vol. 51(1), pages 239-268.
    2. Øivind Anti Nilsen & Kjell Vaage & Arild Aakvik & Karl Jacobsen, 2012. "Intergenerational Earnings Mobility Revisited: Estimates Based on Lifetime Earnings," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(1), pages 1-23, March.
    3. Anders Bohlmark & Matthew J. Lindquist, 2006. "Life-Cycle Variations in the Association between Current and Lifetime Income: Replication and Extension for Sweden," Journal of Labor Economics, University of Chicago Press, vol. 24(4), pages 879-900, October.
    4. Paul Bingley & Lorenzo Cappellari & Niels Westergård‐Nielsen, 2013. "Unemployment Insurance, Wage Dynamics and Inequality Over the Life Cycle," Economic Journal, Royal Economic Society, vol. 0, pages 341-372, May.
    5. Michael Baker & Gary Solon, 2003. "Earnings Dynamics and Inequality among Canadian Men, 1976-1992: Evidence from Longitudinal Income Tax Records," Journal of Labor Economics, University of Chicago Press, vol. 21(2), pages 267-288, April.
    6. Björklund, Anders & Jäntti, Markus & Lindquist, Matthew J., 2009. "Family background and income during the rise of the welfare state: Brother correlations in income for Swedish men born 1932-1968," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 671-680, June.
    7. Ostrovsky, Yuri, 2012. "The correlation of spouses' permanent and transitory earnings and family earnings inequality in Canada," Labour Economics, Elsevier, vol. 19(5), pages 756-768.
    8. Björklund Anders & Lindahl Lena & Lindquist Matthew J., 2010. "What More Than Parental Income, Education and Occupation? An Exploration of What Swedish Siblings Get from Their Parents," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-40, November.
    9. Grawe, Nathan D., 2006. "Lifecycle bias in estimates of intergenerational earnings persistence," Labour Economics, Elsevier, vol. 13(5), pages 551-570, October.
    10. Baker, Michael, 1997. "Growth-Rate Heterogeneity and the Covariance Structure of Life-Cycle Earnings," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 338-375, April.
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    More about this item

    Keywords

    intergenerational transmission; sibling correlations; life-cycle earnings;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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