Intergenerational Income Persistence Research Articles

Like Mother, Like Child? The Rise of Women's Intergenerational Income Persistence in Sweden and the United States

Like Mother, Like Child? The Rise of Women's Intergenerational Income Persistence in Sweden and the United States

Like Mother, Like Child? The Rise of Women’s Intergenerational Income Persistence in Sweden and the United States

Like Mother, Like Child? The Rise of Women’s Intergenerational Income Persistence in Sweden and the United States

The Impacts of COVID-19 Shock on Intergenerational Income Mobility: Evidence from China.

The COVID-19 crisis has caused a huge negative shock to economic activities worldwide, leading to a reduction in income and changes in income distribution. Intergenerational mobility is an important indicator of sustainable social development. This paper explores the short-term impacts of the sudden COVID-19 pandemic on intergenerational income mobility and personal income in China. Using the variation in the number of confirmed cases across provinces, we construct a province-level pandemic intensity index and combine it with individual data from the China Family Panel Studies (CFPS). We apply a general difference-in-difference strategy to identify the causal effect of the pandemic on intergenerational income mobility. We find that personal income is positively related to parental income, and that the COVID-19 crisis has caused a decline in individual income and exacerbated intergenerational income persistence. A more intense COVID-19 pandemic shock is associated with a larger increase in intergenerational income elasticity and intergenerational income rank–rank slope. We found that with one standard deviation increase in local pandemic intensity, the intergenerational income elasticity increases by 0.315 and the intergenerational income rank–rank slope increases by 0.198 on average. The mechanism testing suggests that heterogeneous effects among different groups are the force underlying the results. Low-income, low-skilled, and low-parental-income individuals have suffered a more severe impact from the pandemic shock.

Prevalence of SOEs and intergenerational income persistence: Evidence from China

AbstractThis paper evaluates the impact of state‐owned enterprises (SOEs) on intergenerational income persistence in China. Using population census, we first estimate the intergenerational income elasticities (IGEs) across Chinese prefecture‐level cities. We then find that the prevalence of SOEs in a city is negatively associated with its IGE. The estimation using the geographic variation in SOEs created by the ‘156 Projects’ as an instrumental variable shows the suggestive evidence that the relationship between the prevalence of SOEs and intergenerational income persistence might be causal. Further analysis reveals that the prevalence of SOEs may hamper intergenerational mobility through (1) stifling competition from the private sector and (2) facilitating occupational inheritance within SOEs. Our research implies that reforming SOEs shall promote social mobility.

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

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.

Income Segregation and Intergenerational Mobility Across Colleges in the United States*

Abstract We construct publicly available statistics on parents’ incomes and students’ earnings outcomes for each college in the United States using deidentified data from tax records. These statistics reveal that the degree of parental income segregation across colleges is very high, similar to that across neighborhoods. Differences in postcollege earnings between children from low- and high-income families are much smaller among students who attend the same college than across colleges. Colleges with the best earnings outcomes predominantly enroll students from high-income families, although a few mid-tier public colleges have both low parent income levels and high student earnings. Linking these income data to SAT and ACT scores, we simulate how changes in the allocation of students to colleges affect segregation and intergenerational mobility. Equalizing application, admission, and matriculation rates across parental income groups conditional on test scores would reduce segregation substantially, primarily by increasing the representation of middle-class students at more selective colleges. However, it would have little effect on the fraction of low-income students at elite private colleges because there are relatively few students from low-income families with sufficiently high SAT/ACT scores. Differences in parental income distributions across colleges could be eliminated by giving low- and middle-income students a sliding-scale preference in the application and admissions process similar to that implicitly given to legacy students at elite private colleges. Assuming that 80% of observational differences in students’ earnings conditional on test scores, race, and parental income are due to colleges’ causal effects—a strong assumption, but one consistent with prior work—such changes could reduce intergenerational income persistence among college students by about 25%. We conclude that changing how students are allocated to colleges could substantially reduce segregation and increase intergenerational mobility, even without changing colleges’ educational programs.

Parental Time Investment and Intergenerational Mobility

This paper constructs a quantitative model of intergenerational mobility in which lifetime income mobility is shaped by various channels including parental time investments in children. The calibrated model delivers positive educational gradients in parental time investment, as observed in the data, and also successfully accounts for untargeted distributional aspects of income mobility, captured in the income quintile transition matrix. The model implies that removing the positive educational gradients in parental time investment during the whole childhood would reduce intergenerational income persistence nearly by 40 percent. Policy experiments suggest that subsidies to childhood investments that can diminish positive educational gradients in parental time investments would increase intergenerational mobility, and that there are better ways of subsidizing investments to achieve greater mobility in terms of aggregate output and welfare.

Rising Intergenerational Income Persistence in China

This paper documents an increasing intergenerational income persistence in China since economic reforms were introduced in 1979. The intergenerational income elasticity increases from 0.390 for the 1970–1980 birth cohort to 0.442 for the 1981–1988 birth cohort; this increase is more evident among urban and coastal residents than rural and inland residents. We also explore how changes in intergenerational income persistence is correlated with market reforms, economic development, and policy changes. (JEL J62, O15, O18, P25, P36)

Does a good father now have to be rich? Intergenerational income mobility in rural India

For developing countries, it is difficult to find income mobility studies that rely on datasets linking parents with their children. Most of the available evidence for developing countries, instead, relies on co-resident households and two-sample instrumental variables approach, and findings in the mobility literature suggest that these approaches could introduce bias in the IGE estimates. The current study rectifies this important omission for rural India, and develops strategies that will be useful for similar research in other developing countries. Using a panel dataset spanning 1994–2012, I find that the intergenerational income persistence for rural India is lower than analogous evidence from other developing countries (IGE: 0.30 [se:0.03]). However, the between-groups coefficient of 0.74, which is corroborated by repeated cross-sections from the National Sample Survey, indicates that India is progressing towards cross-caste equality, but at a disappointingly slow rate.

Rising Intergenerational Income Persistence in China

This paper documents an increasing intergenerational income persistence in China since economic reforms were introduced in 1979. The intergenerational income elasticity increases from 0.390 for the 1970–1980 birth cohort to 0.442 for the 1981–1988 birth cohort; this increase is more evident among urban and coastal residents than rural and inland residents. We also explore how changes in intergenerational income persistence is correlated with market reforms, economic development, and policy changes.

Rising Intergenerational Income Persistence in China

This paper documents an increasing intergenerational income persistence in China since economic reforms were introduced in 1979. The intergenerational income elasticity increases from 0.390 for the 1970–1980 birth cohort to 0.442 for the 1981–1988 birth cohort; this increase is more evident among urban and coastal residents than rural and inland residents. We also explore how changes in intergenerational income persistence is correlated with market reforms, economic development, and policy changes.

Educational Inequality, Educational Expansion, and Intergenerational Income Persistence in the United States

The children of high-income parents often become high-income adults, while their low-income peers often become low-income adults. Education plays a central role in this intergenerational income persistence. Because education-based inequalities grew in recent decades, many scholars predicted that intergenerational income persistence would increase. However, previous research suggests that it remained stable across recent cohorts. We address this puzzle. Analyzing National Longitudinal Surveys of Youth data, we find that growing educational inequality by parental income, along with rising economic returns to education, increased intergenerational persistence, as scholars expected. However, two countervailing trends offset this increase. The expansion of higher education reduced persistence, because completing college helps low-income children become high-income adults. Yet, this reduction in persistence was far from enough to offset the increase in persistence associated with growing educational inequality and rising educational returns. Intergenerational persistence would have increased if not for another change: within educational groups, parental income became less predictive of adult income. New methodological tools underlie these findings, tools that quantify, for the first time, education’s full force in intergenerational income persistence. These findings suggest that to reduce intergenerational persistence, educational policies should focus less on how many people complete college and more on who completes college.

The Contribution of Early‐lifeVersusLabour Market Factors to Intergenerational Income Persistence: A Comparison of the UK and Sweden

We explore whether differences in intergenerational income mobility between the UK and Sweden show up early in life, finding stronger associations between parental income and birthweight, height and school performance in the UK. We investigate whether these differentials can account for the country difference in income mobility. While differences in the associations in birthweight and height are too weak to matter, school performance does account for a substantial part of this difference. However, country differences in the earnings returns to these skills are at least as important as the differences in the link between parental income and skills.

The Role of Education for Intergenerational Income Mobility: A comparison of the United States, Great Britain, and Sweden

Previous studies have found that intergenerational income persistence is relatively high in the United States and Britain, especially as compared to Nordic countries. We compare the association between family income and sons’ earnings in the United States (National Longitudinal Study of Youth 1979), Britain (British Cohort Study 1970), and Sweden (Population Register Data, 1965 cohort), and find that both income elasticities and rank-order correlations are highest in the United States, followed by Britain, with Sweden being clearly more equal. We ask whether differences in educational inequality and in return to qualifications can explain these cross-country differences. Surprisingly, we find that this is not the case, even though returns to education are higher in the United States. Instead, the low income mobility in the United States and Britain is almost entirely due to the part of the parent-son association that is not mediated by educational attainment. In the United States and especially Britain, parental income is far more important for earnings at a given level of education than in Sweden, a result that holds also when controlling for cognitive ability. This goes against widespread ideas of the United States as a country where the role of ascription is limited and meritocratic stratification prevails.

Intergenerational income persistence and transmission mechanism: Evidence from urban China

In this paper I investigate the intergenerational income association and its transmission channels amid China's economic transition period using urban data from the Chinese Household Income Projects in 1995 and 2002. The estimated intergenerational income elasticity is 0.43 and 0.51 for cohorts educated prior to and after the market reform respectively, and reaches 0.71 among households with above average income in the post-reform era. Besides the conventional channel of education, this paper estimates the contribution from social capital and ownership of work unit across cohorts and income groups. There is weak evidence that prior to market reform, ownership of work unit contributes most to the intergenerational income persistence for households with below average income, while social capital leads the three contributors in households with above average income. However, in the post-reform era, parents with below average income invest statistically significantly in children's education which contributes most to the intergenerational income persistence. The leading contributor in families with above average income shifts to social capital. Possible explanations for such a shift lie in the ability and incentive of parents from different income categories to invest in their children. The results are tested through a series of robustness checks, and provide empirical support for promoting policies on the equality of opportunity.

Lifecycle variation, errors-in-variables bias and nonlinearities in intergenerational income transmission: new evidence from Canada

This paper uses Canadian administrative data to test the impact of lifecycle earnings variation and errors-in-variables bias on estimates of intergenerational earnings and income mobility. We find lower levels of mobility compared to previous studies, with a new estimate of the father-son intergenerational earnings elasticity of 0.32. Our analysis also shows that the father-daughter elasticity is much less sensitive to these biases. We investigate whether improved measures of father/child permanent earnings may have a distinct impact on the estimated intergenerational persistence at different parts of the distribution. Taking advantage of exceptionally high sample sizes, we find that the impact of lifecycle bias is more pronounced at the top of the income distribution. We also document that much of the average intergenerational income persistence in Canada can be accounted for by limited mobility at the top, while mobility is significantly higher among children born to low-income fathers. These nonlinear patterns resemble those found in Northern Europe and are different from those observed in the United States.

Racial Trends and Differences in the Intergenerational Transmission of Education

I estimate the intergenerational transmission of education in the United States between 1980 and 2013. I find that intergenerational persistence in education has increased substantially among blacks in recent years while remaining stable among whites and Hispanics. I observe this trend when using data from the Panel Study of Income Dynamics as well as the National Longitudinal Surveys of Youth. I demonstrate that much of the increase in educational persistence among blacks is due to decreases in upward mobility. The increase in black educational persistence is found in both two-parent and single-parent households, and I do not find similar trends and differences when estimating intergenerational income persistence.

Early childhood education expenditures and the intergenerational persistence of income

We consider the extent to which cross-country differences in the intergenerational persistence of income can be explained by differences in government spending on early childhood education. We build a life-cycle model where human capital is accumulated in early, middle and late childhood. Both families and the government can increase the human capital of young agents by investing in education at each stage of childhood. Ability in each dynasty and wages per unit of human capital are stochastic. Different realizations of these values and the resultant education spending histories generate a stochastic steady-state distribution of income. Government spending can reduce persistence by weakening the link between parental income and education spending for a child. Our results show that doubling early childhood spending in the U.S. to match levels in Norway and Denmark eliminates less than 8.5 percent of the gap in intergenerational income persistence. Increased government education spending in later childhood has almost no effect on persistence. Early childhood expenditures can have a larger effect when allocated to low income families.

An alternative measure of intergenerational income mobility based on a random coefficient model

SUMMARYWe propose an alternative measure of the degree to which income status is transmitted from one generation to another. Our indicator of intergenerational income mobility is based on a random coefficient model, which allows for variation in intergenerational mobility across families due to multiplicative unobserved family‐specific characteristics. This alternative measure suggests that intergenerational income persistence is typically stronger than when intergenerational income mobility is measured using the standard elasticity of sons' income with respect to fathers' income. Copyright © 2011 John Wiley & Sons, Ltd.

Accounting for Intergenerational Income Persistence: Noncognitive Skills, Ability and Education

We analyse in detail the factors that lead to intergenerational persistence among sons, where this is measured as the association between childhood family income and later adult earnings. We seek to account for the level of income persistence in the 1970 BCS cohort and also to explore the decline in mobility in the UK between the 1958 NCDS cohort and the 1970 cohort. The mediating factors considered are cognitive skills, non-cognitive traits, educational attainment and labour market attachment. Changes in the relationships between these variables, parental income and earnings are able to explain over 80% of the rise in intergenerational persistence across the cohorts.