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Parents and Children : Changes in Income Distribution and the Inheritance of Economic Status

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  • Ramses ABUL NAGA

Abstract

Using a US sample of parents and children, we examine income distribution in two generations. We find that the mean of the children's distribution is higher than that of parents', but incomes were more equally distributed in the lower deciles of the latter distribution. Groups of children raised in richer families have higher average incomes and lower risks of being poor, but they also exhibit higher income variances than children of poorer origins. This latter result is used to investigate the performance of weighted least squares estimators of income transmission equations. Adjusting the data for heteroscedasticity, income inheritance is found to be more intense, and the goodness of fit of the estimated model is substantially improved over the results of the constant variance framework.

Suggested Citation

  • Ramses ABUL NAGA, 1997. "Parents and Children : Changes in Income Distribution and the Inheritance of Economic Status," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9706, Université de Lausanne, Faculté des HEC, DEEP.
  • Handle: RePEc:lau:crdeep:9706
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    Keywords

    Inequality; poverty; intergenerational mobility; heteroscedasticity; weighted least squares estimators;

    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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