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Intergenerational economic mobility in the U.S., 1940 to 2000

  • Daniel Aaronson
  • Bhashkar Mazumder

We use two sample instrumental variables to estimate intergenerational economic mobility from 1940 to 2000. We find intergenerational mobility increased from 1940 to 1980 but declined sharply thereafter, a pattern similar to cross-sectional inequality trends. However, the returns to education account for only some of these patterns. The time- series may help to reconcile previous findings in the intergenerational mobility literature. Our estimates imply a somewhat different pattern for the intergenerational income correlation, a measure insensitive to changes in cross-sectional inequality that has implications for rank mobility. We find the post-1980 decline in intergenerational rank mobility marks a return to historical levels. Consequently, by 2000, the rate of intergenerational movement across the income distribution appears historically normal, but, as cross-sectional inequality has increased, earnings are regressing to the mean at a slower rate, causing economic differences between families to persist longer than earlier in the century.

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Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-05-12.

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Date of creation: 2005
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Handle: RePEc:fip:fedhwp:wp-05-12
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