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Accounting for Individual-Specific Heterogeneity in Intergenerational Income Mobility

Author

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," CAMA Working Papers 2024-18, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2024-18
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2024-02/18_2024_chang_durlauf_hu_park.pdf
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    References listed on IDEAS

    as
    1. Raj Chetty & Nathaniel Hendren & Maggie R Jones & Sonya R Porter, 2020. "Race and Economic Opportunity in the United States: an Intergenerational Perspective [“Intergenerational Mobility of Immigrants in the US Over Two Centuries,”]," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(2), pages 711-783.
    2. Raj Chetty & Nathaniel Hendren & Patrick Kline & Emmanuel Saez, 2014. "Where is the land of Opportunity? The Geography of Intergenerational Mobility in the United States," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(4), pages 1553-1623.
    3. Stewart, Mark B., 2005. "A comparison of semiparametric estimators for the ordered response model," Computational Statistics & Data Analysis, Elsevier, vol. 49(2), pages 555-573, April.
    4. Gallant, A Ronald & Nychka, Douglas W, 1987. "Semi-nonparametric Maximum Likelihood Estimation," Econometrica, Econometric Society, vol. 55(2), pages 363-390, March.
    5. Jiafeng Chen & Jonathan Roth, 2022. "Logs with zeros? Some problems and solutions," Papers 2212.06080, arXiv.org, revised Nov 2023.
    6. Otis Duncan, 1968. "Patterns of occupational mobility among Negro men," Demography, Springer;Population Association of America (PAA), vol. 5(1), pages 11-22, March.
    7. Debopam Bhattacharya & Bhashkar Mazumder, 2011. "A nonparametric analysis of black–white differences in intergenerational income mobility in the United States," Quantitative Economics, Econometric Society, vol. 2(3), pages 335-379, November.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    uncertainty intergenerational income mobility; ordered multinomial probability model; nonparametric estimation; heterogeneous treatment effects; reproducing kernel Hilbert space; effects of parental education;
    All these keywords.

    JEL classification:

    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality

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