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Choosing the right parents: changes in the intergenerational transmission of inequality between 1980 and the early 1990s

  • David I. Levine
  • Bhashkar Mazumder

This paper uses the National Longitudinal Surveys (NLS), the Panel Study of Income Dynamics (PSID), and the General Social Survey (GSS) to measure the elasticity of family income on men’s adult earnings in 1980 and the early 1990s. The study finds a large and statistically significant increase in the importance of family income over time when comparing cohorts in the NLS, a dataset that has not been previously used for this purpose. We also find a large but statistically insignificant increase when using the GSS. The PSID, however, shows a large but statistically insignificant decline in this parameter. The results imply that changes in the effect of family income did not operate through the channel of human capital. Results suggest that the rate of inheritability of income may have increased in recent decades, but this evidence is not yet definitive. Researchers, therefore, should exercise caution when generalizing about trends over time when using small samples from just one dataset such as the PSID.

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Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-02-08.

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Date of creation: 2002
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Handle: RePEc:fip:fedhwp:wp-02-08
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  1. A. B. Atkinson, 1981. "On Intergenerational Income Mobility in Britain," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 3(2), pages 194-218, January.
  2. Goldberger, A.S., 1989. "Economic And Mechanical Models Of Intergenerational Transmission," Working papers 374, Wisconsin Madison - Social Systems.
  3. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September.
  4. Mary Corcoran & Roger Gordon & Deborah Laren & Gary Solon, 1992. "The Association between Men's Economic Status and Their Family and Community Origins," Journal of Human Resources, University of Wisconsin Press, vol. 27(4), pages 575-601.
  5. John Shea, 1997. "Does Parents' Money Matter?," NBER Working Papers 6026, National Bureau of Economic Research, Inc.
  6. Murphy, Kevin M & Welch, Finis, 1992. "The Structure of Wages," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 285-326, February.
  7. Bowles, Samuel, 1972. "Schooling and Inequality from Generation to Generation," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages S219-S51, Part II, .
  8. Behrman, Jere & Tarbman, Paul, 1985. "Intergenerational Earnings Mobility in the United States: Some Estimates and a Test of Becker's Intergenerational Endowments Model," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 144-51, February.
  9. Menchik, Paul L, 1979. "Inter-generational Transmission of Inequality: An Empirical Study of Wealth Mobility," Economica, London School of Economics and Political Science, vol. 46(184), pages 349-62, November.
  10. Peters, H Elizabeth, 1992. "Patterns of Intergenerational Mobility in Income and Earnings," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 456-66, August.
  11. Miles Corak & Andrew Heisz, 1999. "The Intergenerational Earnings and Income Mobility of Canadian Men: Evidence from Longitudinal Income Tax Data," Journal of Human Resources, University of Wisconsin Press, vol. 34(3), pages 504-533.
  12. Peter Gottschalk & Robert Moffitt, 1994. "The Growth of Earnings Instability in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 217-272.
  13. Bhashkar Mazumder, 2002. "Earnings Mobility in the US: A New Look at Intergenerational Inequality," Working Papers 02-11, Center for Economic Studies, U.S. Census Bureau.
  14. Solon, Gary, 1989. "Biases in the Estimation of Intergenerational Earnings Correlations," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 172-74, February.
  15. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
  16. Joseph G. Altonji & Thomas A. Dunn, 1991. "Relationships Among the Family Incomes and Labor Market Outcomes of Relatives," NBER Working Papers 3724, National Bureau of Economic Research, Inc.
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