Earnings Mobility Research Articles

Human capital transmission and the earnings of second-generation immigrants in Sweden

Abstract We compare the earnings and the intergenerational earnings mobility of immigrants with natives in Sweden. We find an overall convergence in average earnings between immigrants and natives across generations. This convergence hides a divergence in average earnings between groups of immigrants with different ethnic origins. We also find that, on average, immigrants have lower intergenerational earnings mobility within groups with similar ethnic backgrounds. Immigrant groups with relatively low intergenerational earnings mobility increased their average relative earnings in the second generation. The interpretation of this is that immigrant groups with a high degree of intergenerational transmission of human capital from parent to offspring improve their position on the labor market across generations.

Gender Differences in the Earnings Mobility of Migrants

AbstractThis study analyses gender differences in the intergenerational earnings mobility of second‐generation migrants in Germany. Thereby it takes into account the influence of assortative mating and the parental integration. First, intergenerational earnings elasticities are estimated at the mean and along the earnings distribution. The results do not reveal large differences in the mobility — neither between natives and migrants nor between men and women. Second, intergenerational changes in the relative earnings position are analysed. These results confirm that migrants are mostly as (im)mobile as the native population.

Microeconometric analysis of earnings mobility of immigrants and ethnic minorities: evidence from the UK

This paper analyzes intergenerational earnings mobility of immigrants and ethnic minorities in the UK. We use a two-sample technique and utilize the British Household Panel Survey for estimating the mobility coefficient. The estimation provides the evidence of differences in generational mobility based on immigration status and ethnic origin. Earnings of the native population tend to have a strong correlation with that of their fathers, a mobility coefficient of 0.34. However, for immigrants as well as ethnic minorities, the fathers’ earnings have a smaller impact on childrens’ earnings with a much lower coefficient estimate.

AN INTERNATIONAL COMPARISON OF LIFETIME INEQUALITY: HOW CONTINENTAL EUROPE RESEMBLES NORTH AMERICA

We compare earnings inequality and mobility across the United States, Canada, France, Germany and the United Kingdom during the late 1990s. A flexible model of earnings dynamics that isolates positional mobility within a stable earnings distribution is estimated. Earnings trajectories are then simulated, and lifetime annuity value distributions are constructed. Earnings mobility and employment risk are found to be positively correlated with base-year inequality. Taken together they produce more equalization in countries with high cross-section inequality such that the countries in our sample have more similar lifetime inequality levels than cross-section measures suggest.

Income Mobility – Curse or Blessing? Mobility in Social Security Earnings: Data on West-German Men since 1950

Abstract Descriptions and analyses of citizens' or households' income have a long tradition in economics. A large body of research has recognized that levels of income and how income is distributed are important contributors to the wealth of nations. Within the broader context of income and its distribution, there has also been a considerable amount of research on the process underlying income distribution that is, income mobility. The relevance of income mobility is manifold. First of all, mobility is an indicator for an open society providing economic opportunities for everyone. As people are normally risk averse, they are interested in a steady income stream. This can be called the security aspect. Another facet of income mobility is the incentive aspect. Upward mobility provides incentives for successful economic activity as it is possible to move up the income ladder. If upward mobility offers the “carrot”, downward mobility epitomizes the “stick” of economic activity. Downward mobility increases ins...

Seeking Success in Canada and the United States: The Determinants of Labour Market Outcomes Among the Children of Immigrants

This paper reviews recent research on the determinants of the labour market outcomes of the children of immigrants in Canada and in the U.S. New research on labour market outcomes in Canada is also presented. In the aggregate, and with no controls, the labour market outcomes of the second generation - the children of immigrants - are equal to, or better than, those of the third-and-higher generations - the children of domestic-born parents. However, the story is somewhat different when the superior educational levels and the residential locations of the second generation are taken into account. In the U.S., the second generation’s advantage in labour market outcomes disappears; in Canada, among second-generation members of a visible-minority group, the advantage turns marginally negative. Ethnic group/source region differences in outcomes loom large in both countries. The important determinants of the earnings gap between the second generation and the third-and-higher generations include educational attainment, residential location, ethnic background, the degree of “ethnic capital,” and the educational and earnings mobility between immigrants and their children.

JOB DISPLACEMENT AND THE INTER‐TEMPORAL MOVEMENT OF WORKERS THROUGH THE EARNINGS AND INCOME DISTRIBUTIONS

This paper uses the Panel Study of Income Dynamics to examine how job displacement influences intragenerational earnings and income mobility. Job displacement increases the probability of downward labor earnings mobility for several years after separation occurs. Furthermore, the probability of being in the bottom half of the earnings distribution increases significantly, not only in the year of displacement, but also for several years afterwards. However, after considering additional measures of financial well‐being (income from other family members and government transfer payments), the short‐ and long‐term impact of displacement on movements throughout the distribution is reduced. (JEL J63, J65)

Intergenerational Earnings Mobility and Preferences for Redistribution

This paper analyzes the extent to which intergenerational upward and downward mobility in earnings are related to individuals’ preferences for redistribution. A novel survey question from the German Socio-Economic Panel Study—whether the taxes paid by unskilled workers are too high, adequate or too low—are used to elicit attitudes toward redistribution. Intergenerational mobility with regard to long-term earnings is measured using a rich panel data spanning an observation window of 22 years. The results reveal that intergenerational mobility is significantly related to preferences for redistribution. The empirical results yield strong and robust support for Piketty’s (1995) rational-learning theory: individuals who experience upward (downward) intergenerational mobility are less (more) likely to favor redistribution taxation policies.

Intergenerational Earnings Mobility in Japan Among Sons and Daughters: Levels and Trends

This paper estimates the extent of intergenerational income mobility in Japan among sons and daughters born between 1935 and 1975. Our estimates rely on a two-sample instrumental variables approach using representative data from the Japanese Social Stratification and Mobility (SSM) surveys, collected between 1965 and 2005. Father's income is predicted on the basis of a rich set of variables including education, occupation and job characteristics and we discuss changes in the Japanese earnings structure for cohorts born between the early 1900s and the 1960s. Our main results indicate that the intergenerational income elasticity (IGE) for both sons and daughters, in Japan lies around .35, which is an intermediate value, by international standards. We discuss the sensitivity of the IGE to using either personal or family income as the income variable for both fathers and children and perform some robustness analysis with respect to the first-step specification and to the age selection rule for children. We also examine changes across cohorts in the IGE. Results indicate that intergenerational mobility has been roughly stable over the last decades. Lastly, we estimate the intergenerational correlation of earnings.

Intergenerational Earnings Mobility Revisited: Estimates Based on Lifetime Earnings*

AbstractUsing Norwegian intergenerational data, which include a substantial part of the life‐cycle earnings for children and almost the entire life‐cycle earnings for their fathers, we present new estimates of intergenerational mobility. Extending the length of fathers’ earnings window from 5 to 25 years increases estimated elasticities. Increasing the age at which fathers’ earnings are observed has the opposite effect. Biases in the estimated elasticities are related to both transitory earnings variation and life‐cycle measurement error; the former appear to be more important than the latter. Estimation bias stemming from persistence in transitory innovations plays only a minor role. Our findings indicate that intergenerational earnings mobility in Norway might have been strongly overstated in many earlier studies with shorter earnings histories. Some of our new estimates are twice as large as earlier estimates.

Two Dimensions to Economic Incorporation: Soviet Immigrants in the Israeli Labour Market

This paper examines the economic integration of immigrants from the Former Soviet Union into the Israeli labour market in terms of occupational and earnings mobility (i.e. decreasing occupational and earnings disparities) in comparison with several Israeli Jewish sub-populations. Using data from annual Income Surveys conducted by the Israel Bureau of Statistics between the years 1995 and 2006, we find little occupational and earnings mobility of Soviet immigrants throughout the period and substantial occupational and earnings disadvantages compared to all Jewish sub-populations (especially when compared to Jews of European/American origin). The findings are discussed in light of the assimilation model, suggesting that the social and economic circumstances associated with the arrival of Soviet immigrants in Israel have long-lasting, detrimental consequences for their economic assimilation.

Linking Growth, Employment and Poverty Changes in Cameroon

This study reviews the theoretical framework of sectoral decomposition and source decomposition. It isolates the sector-specific and the between-sector effects in accounting for aggregate poverty change in Cameroon using an exact decomposition and accounts for changes in household labour income in terms of labour market performances using a decomposition methodology proposed by Kakwani et al. (2006). During the period 1996-2001, poverty retreated significantly in Cameroon. It significantly contracted in the tertiary and secondary sectors, but the primary sector witnessed a considerable increase in the period under review. Analyses show that the decrease in poverty in the tertiary and secondary sectors is hugely accounted for by the within-sector effects, whereas the increase in poverty among households in the primary sector is largely accounted for by the between-sector effects. These results suggest the importance of ‘earnings mobility’ and ‘job mobility’ as effective strategies to come out of poverty. The massive influx of households into the primary sector from the secondary and tertiary sectors between 1996 and 2001 reflects the importance of the primary sector as a safety net in times of adversity.

Gender Differences in the Intergenerational Earnings Mobility of Second-Generation Migrants

This study analyzes gender differences in the intergenerational earnings mobility of second-generation migrants in Germany. The analysis takes into account potential influences like assortative mating in the form of ethnic marriages and the parental integration measured by parents’ years since migration. First, intergenerational earnings elasticities are estimated at the mean and along the earnings distribution. The results do not reveal large differences in the intergenerational mobility – neither between natives and migrants nor between men and women. Second, intergenerational changes in the relative earnings position are analyzed. The results show that migrants are less likely than natives to worsen their relative earnings position while they have the same probability as natives to improve their earnings position. In summary, migrants are mostly as (im)mobile as the native population.

ESTIMATING LONG TERM EARNINGS MOBILITY IN ARGENTINA WITH PSEUDO-PANEL DATA

Applying a dynamic pseudo-panel to the earnings data in Argentina, the present paper estimates the long-term earnings mobility in the period 1985- 2004. The results obtained herein show some earnings mobility over the long term in Argentina for male occupied workers. The results also suggest that the labor market in Argentina does not substantially contribute to the acceleration of the individual’ earnings level recovery after a negative shock.

Primary and Secondary School Quality and Intergenerational Earnings Mobility

While theory suggests that public expenditures on education may affect intergenerational earnings mobility, the direction of the effect hinges on whether such outlays substitute for or complement private human capital investments. Analysis of U.S. census data, 1940–2000, shows that state-cohorts with low pupil-to-teacher ratios enjoy less intergenerational mobility: a two-standard-deviation reduction in the pupil-to-teacher ratio increases earnings persistence by 40 percent. These results are robust to controls for the average pupil-to-teacher ratio in the state in years the son was not in school, a result contrary to simple endogeneity stories.

Earnings Mobility in Times of Growth and Decline: Argentina from 1996 to 2003

Summary In recent years Argentina’s economy has experienced both rapid growth and severe decline. In this paper, we use a series of one-year long panels to study who gained the most in pesos when the economy grew and who lost the most in pesos when the economy contracted. Various considerations led us to expect that mobility would be divergent—that is, that the individuals who started with the highest initial earnings would enjoy the largest earnings gains in pesos. Contrary to expectations and for a wide range of specifications, mobility is found to be mostly convergent, sometimes neutral, and never divergent.

Earnings Inequality and Mobility in the United States: Evidence from Social Security Data since 1937*

This paper uses Social Security Administration longitudinal earnings micro data since 1937 to analyze the evolution of inequality and mobility in the United States. Annual earnings inequality is U-shaped, decreasing sharply up to 1953 and increasing steadily afterward. Short-term earnings mobility measures are stable over the full period except for a temporary surge during World War II. Virtually all of the increase in the variance in annual (log) earnings since 1970 is due to increase in the variance of permanent earnings (as opposed to transitory earnings). Mobility at the top of the earnings distribution is stable and has not mitigated the dramatic increase in annual earnings concentration since the 1970s. Long-term mobility among all workers has increased since the 1950s but has slightly declined among men. The decrease in the gender earnings gap and the resulting substantial increase in upward mobility over a lifetime for women are the driving force behind the increase in long-term mobility among all workers.

Intergenerational Earnings Mobility and the Inheritance of Employers

Our analysis of intergenerational earnings mobility modifies the Becker-Tomes model to incorporate the intergenerational transmission of employers, which is predicted to increase the intergenerational earnings elasticity. About 6% of young Canadian men have the same main employer as their fathers, but this is positively related to paternal earnings and rises discretely at the top of the distribution. We use a switching regression model and identify two regimes associated with the inheritance of employers that have different intergenerational earnings elasticities. The results demonstrate that the inheritance of employers plays a role in understanding observed nonlinearities, and particularly the preservation of economic status at the very top of the earnings distribution.

Equalizing or Disequalizing Lifetime Earnings Differentials? Earnings Mobility in the EU: 1994-2001

Do EU citizens have an increased opportunity to improve their position in the distribution of lifetime earnings? To what extent does earnings mobility work to equalize/disequalize longerterm earnings relative to cross-sectional inequality and how does it differ across the EU? Our basic assumption is that mobility measured over a horizon of 8 years is a good proxy for lifetime mobility. We used the Shorrocks (1978) and the Fields (2008) index. Moreover, we explored the impact of differentials attrition on the two indices. The Fields index is affected to a larger extent by differential attrition than the Shorrocks index, but the overall conclusions are not altered. Based on the Shorrocks (1978) index men across EU have an increasing mobility in the distribution of lifetime earnings as they advance in their career. Based on the Fields index (2008) the equalizing impact of mobility increases over the lifetime in all countries, except Portugal, where it turns negative for long horizons. Thus, Portugal is the only country where mobility acts as a disequalizer of lifetime differentials. The highest lifetime mobility is recorded in Denmark, followed by UK, Belgium, Greece, Ireland, Netherlands, Italy, France, Spain, Germany, and the lowest, Portugal. The highest mobility as equalizer of longer term inequality is recorded in Ireland and Denmark, followed by France and Belgium with similar values, then UK, Greece, Netherlands, Germany, Spain and Italy.

Intergenerational Earnings Mobilities – How Sensitive are they to Income Measures?

This article gives various estimates of intergenerational earnings mobility by applying different earning periods, age brackets, and earning components. The methodology enables us to investigate how sensitive results are to different delimitations and, thereby, to make more accurate international comparisons of intergenerational earnings mobility. We find that intergenerational earnings mobility is found to be substantially lower when hourly wage rates rather than annual earnings are used, whether the latter are inclusive or exclusive of public transfers. Moreover, when the same specifications are applied for Denmark as for other countries, we find that intergenerational earnings mobility from father to son in Denmark is on the same level as in Sweden, Norway, and Finland, whereas the intergenerational earnings mobility in all the Nordic countries is found to be higher than in the United Kingdom and the United States.