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Intergenerational Earnings Mobility: Mechanism and Measurement

Author

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  • Honggao Cao

    (Institute for Social Research, University of Michigan)

Abstract

Based on a model of two-stage life cycle, this paper investigates and measures intergerational relationships in lifetime earnings. Using data from PSID, I have found that the lifetime earnings transmission equation is non-linear. The elasticity of a son's lifetime earnings with respect to his father's, which may be loosely regarded as the inverse of intergenerational earnings mobility, is not constant across families. Specifically the relationship between the elasticity and the father's log lifetime earnings is of an inverted U- shape: the elasticity is relatively small at both ends of the spectrum, with the maximum in the middle.

Suggested Citation

  • Honggao Cao, 2005. "Intergenerational Earnings Mobility: Mechanism and Measurement," Labor and Demography 0501006, EconWPA.
  • Handle: RePEc:wpa:wuwpla:0501006
    Note: Type of Document - pdf; pages: 43
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/lab/papers/0501/0501006.pdf
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    References listed on IDEAS

    as
    1. Goldberger, Arthur S, 1989. "Economic and Mechanical Models of Intergenerational Transmission," American Economic Review, American Economic Association, vol. 79(3), pages 504-513, June.
    2. 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 1333-1381, September.
    3. 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 144-151, February.
    4. Heckman, James J, 1976. "A Life-Cycle Model of Earnings, Learning, and Consumption," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 11-44, August.
    5. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
    6. Peters, H Elizabeth, 1992. "Patterns of Intergenerational Mobility in Income and Earnings," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 456-466, August.
    7. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352-352.
    8. Blinder, Alan S & Weiss, Yoram, 1976. "Human Capital and Labor Supply: A Synthesis," Journal of Political Economy, University of Chicago Press, vol. 84(3), pages 449-472, June.
    9. Haley, William J, 1973. "Human Capital: The Choice Between Investment and Income," American Economic Review, American Economic Association, vol. 63(5), pages 929-944, December.
    10. Durlauf, Steven N, 1996. "A Theory of Persistent Income Inequality," Journal of Economic Growth, Springer, vol. 1(1), pages 75-93, March.
    11. Durlauf, S.N. & Cooper, S.J. & Johnson, P.A., 1993. "On the Evolution of Economic Status Across Generations," Working papers 9329, Wisconsin Madison - Social Systems.
    12. Rosen, Sherwin, 1976. "A Theory of Life Earnings," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 45-67, August.
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    More about this item

    Keywords

    Intergenerational mobility; non-linear intergenerational relationship; lifetime earnings; earnings mobility; Ben-Porath Model; human capital investment; regression to the mean; PSID;

    JEL classification:

    • J - Labor and Demographic Economics

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