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Accounting for Individual-Specific Heterogeneity in Intergenerational Income Mobility

Author

Listed:
  • Yoosoon Chang

    (Department of Economics, Indiana University)

  • Steven N. Durlauf

    (University of Chicago)

  • Bo Hu

    (Department of Economics, Indiana University)

  • Joon K. Park

    (Department of Economics, Indiana University)

Abstract

This paper proposes a fully nonparametric model to investigate the dynamics of intergenerational income mobility for discrete outcomes. In our model, an individual’s income class probabilities depend on parental income in a manner that accommodates nonlinearities and interactions among various individual 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 K. Park, 2024. "Accounting for Individual-Specific Heterogeneity in Intergenerational Income Mobility," CAEPR Working Papers 2024-008 Classification-C, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    • Handle: RePEc:inu:caeprp:2024008
    as

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    File URL: https://caepr.indiana.edu/RePEc/inu/caeprp/caepr2024-008.pdf
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    References listed on IDEAS

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