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Reassessing Intergenerational Mobility in Germany and the United States: The Impact of Differences in Lifecycle Earnings Patterns

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Listed author(s):
  • Thorsten Vogel

Abstract

Using longitudinal data on fathers and their children, this study compares the extent of intergenerational mobility in Germany and the United States and introduces an estimation strategy that corrects estimates of intergenerational earnings elasticities for a possible lifecycle bias. In contrast to previous studies, we find that the extent of intergenerational mobility is more limited in the US than in Germany. Furthermore, while the errors-in-variables problems have been dealt with extensively in the literature, the inconsistencies in standard mobility measures due to lifecycle effects have attracted much less attention. The present paper proposes an estimation method that corrects for such inconsistencies. The extent of this lifecycle bias is found to be strong in Germany but only modest in the US.

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File URL: http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2006-055.pdf
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Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2006-055.

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Length: 34 pages
Date of creation: Sep 2006
Handle: RePEc:hum:wpaper:sfb649dp2006-055
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Keywords: Intergenerational mobility; lifecycle bias; comparison of Germany and the US;

Find related papers by JEL classification:

  • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
  • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
  • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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  1. Ljungqvist, Lars, 1993. "Economic underdevelopment : The case of a missing market for human capital," Journal of Development Economics, Elsevier, vol. 40(2), pages 219-239, April.
  2. Bhashkar Mazumder, 2005. "Fortunate Sons: New Estimates of Intergenerational Mobility in the United States Using Social Security Earnings Data," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 235-255, May.
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  4. Gary S. Becker & Nigel Tomes, 1994. "Human Capital and the Rise and Fall of Families," NBER Chapters,in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 257-298 National Bureau of Economic Research, Inc.
  5. Newey, Whitney K. & McFadden, Daniel, 1986. "Large sample estimation and hypothesis testing," Handbook of Econometrics,in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 36, pages 2111-2245 Elsevier.
  6. Dilip Mookherjee & Debraj Ray, 2003. "Persistent Inequality," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 369-393.
  7. Freeman, Scott, 1996. "Equilibrium Income Inequality among Identical Agents," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 1047-1064, October.
  8. Alexandra L. Minicozzi, 2003. "Estimation of sons' intergenerational earnings mobility in the presence of censoring," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(3), pages 291-314.
  9. Dilip Mookherjee & Debraj Ray, 2002. "Is Equality Stable?," American Economic Review, American Economic Association, vol. 92(2), pages 253-259, May.
  10. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
  11. Grawe, Nathan D., 2006. "Lifecycle bias in estimates of intergenerational earnings persistence," Labour Economics, Elsevier, vol. 13(5), pages 551-570, October.
  12. Adrian Pagan, 1986. "Two Stage and Related Estimators and Their Applications," Review of Economic Studies, Oxford University Press, vol. 53(4), pages 517-538.
  13. Gary Solon, 2002. "Cross-Country Differences in Intergenerational Earnings Mobility," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 59-66, Summer.
  14. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
  15. Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1153-1189, December.
  16. Zimmerman, David J, 1992. "Regression toward Mediocrity in Economic Stature," American Economic Review, American Economic Association, vol. 82(3), pages 409-429, June.
  17. Bjorklund, Anders & Jantti, Markus, 1997. "Intergenerational Income Mobility in Sweden Compared to the United States," American Economic Review, American Economic Association, vol. 87(5), pages 1009-1018, December.
  18. Solon, Gary, 1989. "Biases in the Estimation of Intergenerational Earnings Correlations," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 172-174, February.
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