Does Economic Inequality Constrain Intergenerational Economic Mobility? The Association Between Income Inequality During Childhood and Intergenerational Income Persistence in the United States

Abstract

Using the National Longitudinal Study of Youth 1979, I examine the association between income inequality and intergenerational income mobility in the United States. This study finds that rising income inequality is associated with strengthening the importance of parental family income to child’s income. Particularly, the evidence that greater income inequality decreases intergenerational income mobility is clearer when interstate migration problems are addressed. This evidence indicates that income inequality matters since it hinders the equal opportunity to succeed, especially for children from low-income families. If equality of opportunity is a value for policymakers, it provides justification for policy interventions and government efforts to reduce income inequality. A number of sensitivity tests confirm that the main results are robust and reliable.