Intergenerational Transmission Of Income Research Articles

Factors Associated With the Probability of Leaving Bolsa Família Program

ABSTRACT: Conditional cash transfer programs (CCTs) are increasingly common in Latin American countries and have become the main strategy for combating poverty and social inequality. Among many, noteworthy programs include Progresa-Oportunidades, later renamed Prospera, in Mexico in 1997; Programa Familias en Acción in Colombia; Chile Solidario in Chile in 2002; and Bolsa Família Program in Brazil in 2003. The central feature of the Bolsa Família Program (BFP) was that the receipt of monetary benefits by families was tied to the fulfillment of certain conditions, or conditionalities, involving healthcare and education for children and adolescents. The purpose of this design was, in the short term, to combat the negative effects of poverty on family well-being through the transfer of monetary resources, and in the long term, through the requirement of conditionalities, to break the poverty trap caused, in large part, by intergenerational transmission of income and education. The literature on conditional cash transfers has largely focused on entry conditions, paying less attention to exit conditions. This study aims to explore the trajectory of participant families in the Bolsa Família Program, using information obtained from the cohort of individuals born in the city of Pelotas in 2004. The research focuses on the socioeconomic characteristics of families at the time of their child’s birth in 2004 and the follow-up conducted in 2015. Survival analysis models are used to analyze the probability of exiting the program. The results reported by the survival analysis, Kaplan-Meier method, indicate that a BRL 1.00 (US$ 0.30) increase in income reduces, on average, the likelihood of successful departure from the BFP beneficiary family by 1%. Conversely, exercises conducted by family groups indicate that for families receiving benefits above the average, BRL 141.00 (US$ 42.32), the mother’s age and her employment status positively influence the chances of leaving the program. Overall, the results demonstrate that the values of the benefits received are subject to decreasing returns. For families receiving benefits below the average, a one-unit increase in the amount received reduces the probability of exiting the program by an average of 1%. Regarding successful exits, it was observed that having a white father increases the chances by 40%, and if the father is employed, it increases the likelihood of successfully exiting the program by 48%. These results indicate that the successful exit of families from the program is primarily associated with parental characteristics.

Understanding the Effect of Parental Education and Financial Resources on the Intergenerational Transmission of Income

Previous articleNext article No AccessUnderstanding the Effect of Parental Education and Financial Resources on the Intergenerational Transmission of IncomeAiday SikhovaAiday Sikhova Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Journal of Labor Economics Just Accepted Published for the Society of Labor Economists, Economics Research Center/ NORC Article DOIhttps://doi.org/10.1086/720390 Views: 122Total views on this site HistoryAccepted March 21, 2022 PDF download Crossref reports no articles citing this article.

Family-Size Effect on Intergenerational Income Mobility under China’s Family Planning Policy: Testing the Quantity–Quality Trade-Off

The causal link between family size and human capital investment in children is critical for family planning policy. However, empirical studies aiming to test the quantity–quality trade-off are far from sufficient. This paper tried to estimate the family-size effect on intergenerational income mobility using China Family Panel Survey (CFPS) data. The empirical model of intergenerational income mobility with respective to family size was formulated, and the fertility rates allowed by family planning policy were used as an instrument variable for family size. It was found that intergenerational income elasticity tended to decrease with an increase in family size. The impact of family size on intergenerational income elasticity was sensitive to the income rank positions, and nonlinearity in intergenerational transmission of income under unequal family was observed. A quantity–quality trade-off analysis was applied to further test the family-size effect. Pronounced family-size effects were observed in low-income regions with tight budget constraints and in regions with less-developed credit markets, followed by an obvious quantity–quality trade-off. The sex difference in intergenerational transmission of income may be attributed to the existence of the “preference to sons over daughters” phenomenon. The present work provides a theoretical basis for shaping family planning policies toward sustainability.

Research on intergenerational transmission of Chinese residents’ income: Based on data from ten surveys of Chinese Family Tracking Survey from 1989 to 2015

This article uses the rank-ordered probit estimation method and data from the 10 Chinese Family Tracking Survey from 1989 to 2015 to systematically study how the family background, especially the parental income, of urban and rural residents in China since its opening affects the intergenerational transmission of income and income inequality. The results show the following: ① The higher the income of parents is, the higher the income of their offspring. When parents are middle income or above, the probability of their children earning an upper-middle or high income increases significantly. ② Although the income of mothers is low, its impact on children’s income is greater than that of the father’s income. If the mother’s income is middle, upper-middle, or high income, it will increase the probability of her children earning a high income by 12.17%, 28.16% and 45.90%, respectively, while the corresponding influence from the father’s income is 9.62%, 20.69% and 43.82%. ③ For children, the degree of intergenerational income inequality is greater for women than for men, and it is higher in cities than in rural areas. ④ The intergenerational transmission of income is persistent across multiple generations, but the transmission from parents is much higher than from grandparents. It is also difficult for the offspring of a lower-income couple to obtain a higher income. These conclusions are robust to examining different samples and examining the predicted impact of various measures of family background on the income of offspring. Based on the results, this article puts forward policy recommendations to improve intergenerational income consolidation and reduce income inequality.

Intergenerational Transmission, Self-Effort and Income Gap between Urban and Rural Youth in China

Based on the data of China Health and Nutrition Survey (CHNS) from 1991 to 2015, the effects of intergenerational income transmission and self-effort on the income gap between urban and rural youth under different quantiles were studied by using RIF’s unconditional quantile regression and distribution decomposition method. The results show that the parents’ income has a significant impact on the income of urban and rural youth in each quantile, and it is the main driving force to widen the income gap. By decomposing the intergenerational income elasticity, it is found that the intergenerational income of urban youth is mainly transmitted through education, while the rural youth is more reflected in the path of career transmission. Hard work has a strong impact on the income of urban and rural youth only in the middle and low quantiles, and the effect of rural youth is greater than that of urban youth. Hard work can reduce the income gap between urban and rural youth in the middle and low quantiles, but at the cost of “reverse discrimination” against rural youth.

Exploration of the Role of Education in Intergenerational Income Mobility in Canada: Evidence from the Longitudinal and International Study of Adults

Canadian children experience a high level of intergenerational income mobility compared with US children. Moreover, their physical and mental health outcomes, school readiness, and post-secondary attendance are all less tightly associated with parental outcomes than in the United States. In this article, we investigate the role played by children’s education in the intergenerational transmission of income in Canada. Existing research has produced macro-level estimates of mobility to draw comparisons over time and across places and has studied the micro-level mechanisms that underlie the relationship between parents’ and children’s outcomes. However, evidence on the extent to which the different factors investigated drive the broader numbers is still limited. To remedy this, we exploit the Longitudinal and International Study of Adults, a rich panel of integrated survey and administrative data covering 1982–2013. We estimate that the education level of children accounts for 40.5–50.1 percent of the correlation between their income and their parents’, similar to the United States. Moreover, we discuss evidence suggesting that the greater mobility of Canadian children is linked not only to their lower returns to education but also to the weaker association between their education and their parents’ income. Finally, we find that almost half of the effect linked to education is associated with the skills respondents use at work, such as reading or communication.

Does Money Matter for Intergenerational Income Transmission?

The intergenerational income elasticity (IIE) is a crucial measure of income mobility. In this article, we develop a structural model to examine the channels through which this elasticity operates. Using data from the Panel Study of Income Dynamics, we separately identify the human capital and the financial components. The human capital component examines the transmission of human capital, independent of financial investments, whereas the financial component examines the impact of income that is uncorrelated with human capital, that is, exogenous income. Using a two‐stage framework, we show that the IIE operates through both channels. Moreover, our estimates show that the financial component may have a larger effect than previously estimated, plausibly attributing to 36% of intergenerational income transmission. Indeed, this result holds even when the financial component is defined in an incredibly narrow manner. This suggests that cash payments could promote intergenerational mobility.

Better Parents or Richer Parents: Understanding Intergenerational Transmission of Human Capital

There are two essential mechanisms in the canonical model of the transmission of income across generations -- parents' financial resources and parental education. We provide novel empirical evidence to disentangle the significance of these two mechanisms in explaining the intergenerational transmission of income. Two reforms in Sweden provide us with natural experiments to separately identify the effects of parents' financial resources versus parental education: an educational reform that exogenously changed the level of compulsory schooling and quality of education of the parent generation and a tax reform that exogenously altered parents' net income. Using Swedish administrative data, we first find that a 1,000 SEK increase in parental income -- as a result of changes to parental education -- leads to a 280 SEK increase in children's income. Second, exploiting the tax reform, we show that a 1,000 SEK increase in parental income, resulting from changes in parents' financial resources, increases children's income by 74 SEK. The relative impacts of these two mechanisms thus suggest that parents' financial resources amount to about 25% of the effect of parental education on children's income. Third, we show that parents' financial resources matter less for sons. Overall, our findings suggest a comparatively modest impact of parental financial resources on children's income.

Are we born equal: a study of intergenerational income mobility in China

AbstractStudies show that the gain from China's remarkable growth of the past 35 years has not been evenly shared, especially through the intergenerational transmission of income. To address this concern, we use data from China Health and Nutrition Survey and find the intergenerational income elasticity to be 0.466 in 2011, which suggests that sons’ incomes are affected by their fathers’ economic statuses to a large extent. A cross-country comparison indicates that the degree of generational income mobility in China is lower than that in many developed nations. Meanwhile, by investigating possible transmission channels, we find that the fathers’ investments in the sons’ education and occupation play substantial roles in intergenerational transmission of income. The results not only demonstrate the trends in intergenerational income mobility in China, but also identify the most likely transmission channels, which is of great importance to improving social equality.

Inequality of Educational Opportunity? Schools as Mediators of the Intergenerational Transmission of Income

Chetty et al. (2014) show that children from low-income families achieve much better adult outcomes, relative to those from higher-income families, in some places than in others. I use data from several national surveys to investigate whether children’s educational outcomes (educational attainment, test scores, and non-cognitive skills) mediate the relationship between parental and child income. Commuting zones (CZs) with stronger intergenerational income transmission tend to have stronger transmission of parental income to children’s educational attainment, as well as higher returns to education. By contrast, the CZ-level association between parental income and children’s test scores is only weakly related to CZ income transmission, and is stable across grades. There is thus little evidence that differences in the quality of K-12 schooling are a key mechanism driving variation in intergenerational mobility. Access to college plays a somewhat larger role, but most of the variation in CZ income mobility reflects (a) differences in marriage patterns, which affect income transmission when spousal earnings are counted in children’s income; (b) differences in labor market returns to education; and (c) differences in children’s earnings residuals, after controlling for observed skills and the CZ-level return to skill. This points to job networks or the structure of the local labor and marriage markets, rather than the education system, as likely factors influencing intergenerational economic mobility.

Sex Differences in Intergenerational Income Transmission and Educational Attainment: Testing the Trivers-Willard Hypothesis.

From an evolutionary point of view, sex differences in intergenerational transmission of income may be influenced by the Trivers-Willard (T-W) effect: Low status parents should invest more in daughters, whereas high status parents are expected to invest more in sons. This bias in parental investment may result in status-dependent sex biased parental support for higher education and educational attainment and should therefore affect the level of intergenerational income transmission for the sons and daughters. We used the data from the Wisconsin Longitudinal Study (WLS) to model the effect of parental financial investment on the child's income and educational attainment controlling for the number of siblings. The observed sex differences in intergenerational income transmission demonstrate that sons profited more from parental income and education in terms of their own income than daughters. Furthermore, we showed that fathers with a high socioeconomic index (SEI) invest more in their sons' education in terms of completed years of education and financial support during college. In contrast daughters of low SEI fathers completed more years of education and received more financial support than sons of low SEI fathers. However, the pattern in intergenerational income transmission might be better explained as a product of sociological factors and reproductive trade-offs in later life rather than as a consequence of the T-W effect.

Investigating Income Inequality Dynamics in the United States

Recently, income inequality has been rising in many parts of the world. This is creating some serious concerns among policymakers, as higher levels of income inequality can lead to various social ills. However, little is known about the role of historical factors in explaining the current level of inequality. I use the model of Durlauf (1996) as reference to create an econometric model to estimate this impact. Using current and historical data of US states, I find that illiteracy rate in 1920 has a strong positive influence on current level of inequality. The simulation results show that eliminating illiteracy in 1920 would have reduced contemporaneous inequality by 1-5 percent. Higher illiteracy indicates a lower level of human capital, and that can affect income distribution. Through the intergenerational transmission of income, this income distribution is exacerbated in the future, leading to higher levels of inequality.

Educational Attainment and Neighbourhood Outcomes: Differences between Highly-Educated Natives and Non-Western Ethnic Minorities in the Netherlands

In the Netherlands, obtaining a higher education increases the chance to move to a better neighbourhood for native Dutch adults who grew up in a deprived parental neighbourhood. For non-Western minorities, education does not have this positive effect on socio-spatial mobility. In this study we investigate potential explanations for these ethnic differences in the relationship between educational attainment and neighbourhood outcomes over time. We use longitudinal register data from the Netherlands to study a complete cohort of parental home leavers who attained a higher education by the end of the measurement period (1999 to 2012). We supplemented this data with information gathered in the WoON-survey. We examined differences in income trajectories for highly-educated native Dutch and non-Western ethnic minorities; investigated the strength of intergenerational transmission of income for both groups; and assessed individual neighbourhood experiences and contentment. We find that the highly-educated native Dutch in our subpopulation have a substantially higher average income over time, and a weaker association to the income of their parents compared to the non-Western ethnic minorities. Additionally, for ethnic minorities, our results show that the level of contentment with their neighbourhood is highest in deprived neighbourhoods compared to more affluent residential environments, and they more often reside in close proximity to their parents compared to the native Dutch, both suggesting an element of choice in neighbourhood selection.

Does Higher Transitory Income of Parents Permanently Increase the Income of Their Children?

Parent income can predict child income because both parent and child have high human capital, broadly defined, and because the presence of money makes it easier for the child to develop better job prospects. We use 45 years of Panel Study of Income Dynamics (PSID) data to investigate these two channels. We break parent income into a predictable human capital component and a transitory component whose variation is uncorrelated to a wide array of human capital measures. We find that intergenerational income transmission occurs through both channels, but that the coefficient tied to human capital income is approximately 0.7-0.8, whereas the coefficient on the residual or transitory income component, which is more closely tied to pure money transfer, is 0.2 and possibly substantially lower. Thus it appears that the intergenerational income elasticity is largely recovering human capital effects rather than the influence of money.

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.

Cohort differences in intergenerational income transmission in Finland

Major social changes such as occupational restructuring, educational expansion and increasing income inequality are likely to significantly influence the intergenerational transmission of income. The aim in this article is to investigate this question in an analysis of the transmission of low and high income in Finland in five birth cohorts born between 1956 and 1978. The focus is on the contribution of parental social class and personal educational level to this association. The analyses are based on a longitudinal register-based data set that is a representative 11-per-cent sample of the Finnish population. The level of intergenerational income transmission among those with a low- and a high-income parental background is stable among men, and is increasing slightly among women. Simultaneously, the role of achieved education as a mechanism strengthens slightly upon entry to the lowest income level, and declines upon entry to the highest level. These results indicate that despite the increasing income inequality, intergenerational transmission remains rather stable, but the mediating role of educational qualifications may have changed. Occupational restructuring seems to have no clear influence on the process.

Nonlinearity in intergenerational income transmission: A cross-country analysis

The aim of this paper is to explore nonlinearity in intergenerational income transmission. We use a set of occupational tables in different countries to test nonlinearity. We also empirically address how policy variables can affect nonlinearity. Our findings suggest that concavity is supported in those societies with less credit constraints, but with more poverty and income inequality; education has an increasing effect on convexity.

BEYOND EDUCATION AND FAIRNESS: A LABOR MARKET TAXATION MODEL FOR THE GREAT GATSBY CURVE

Applied researchers have been drawn to models that attribute the demonstrated cross‐country differences in intergenerational income transmission to government failures to invest in the human capital of poor children. To highlight another potential mechanism, the disincentive effects of labor market taxation and redistribution, we present a simple model that can explain cross‐country differences in intergenerational mobility and other previously observed empirical patterns. Empirical tests using data on income mobility, tax rates, and public expenditures largely support the model predictions. We conclude that the common presumption that intergenerational mobility largely measures fairness or opportunity, and the resultant policy recommendations, are premature. (JEL D31, J24, J62)

Investigating Income Inequality in the United States

Recently, income inequality has been rising in many parts of the world. This is creating some serious concerns among policymakers, as higher levels of income inequality can lead to various social ills. However, little is known about the role of historical factors in explaining the current level of inequality. I use the model of Durlauf (1996) as reference to create an econometric model to estimate this impact. I use current and historical data of US states to study the effect of different socio-economic factors on inequality. Using two measures of income inequality, one that places equal weight on all individuals, and one that places a higher weight on the richer group, I find that illiteracy rate in 1920 and bank deposits in 1920 have a strong positive influence on current level of inequality. Higher levels of farmland inequality in 1920 also increase current incomes of the richer segment among the rich. Higher illiteracy indicates a lower level of human capital, and that can affect income distribution. Higher levels of bank deposits and farmland inequality in the past indicate a higher inequality of wealth in the past. Through the intergenerational transmission of income and wealth, income distribution can be more skewed in the future, leading to higher levels of inequality.

Income Inequality and Intergenerational Income Mobility in the United States

Is there a relationship between family income inequality and income mobility across generations in the United States? As family income inequality rose in the United States, parental resources available for improving children's health, education, and care diverged. The amount and rate of divergence also varied across US states. Researchers and policy analysts have expressed concern that relatively high inequality might be accompanied by relatively low mobility, tightening the connection between individuals' incomes during childhood and adulthood. Using data from the Panel Study of Income Dynamics, the National Longitudinal Survey of Youth, and various government sources, this paper exploits state and cohort variation to estimate the relationship between inequality and mobility. Results provide very little support for the hypothesis that inequality shapes mobility in the United States. The inequality children experienced during youth had no robust association with their economic mobility as adults. Formal analysis reveals that offsetting effects could underlie this result. In theory, mobility-enhancing forces may counterbalance mobility-reducing effects. In practice, the results suggest that in the US context, the intergenerational transmission of income may not be very responsive to changes in inequality.