The Intergenerational Transmission of Family-Income Advantages in the United States

Abstract

Estimates of economic persistence and mobility in the United States, as measured by the intergenerational elasticity (IGE), cover a very wide range. Nevertheless, careful analyses of the evidence suggested until recently that as much as half, and possibly more, of economic advantages are passed on from parents to children. This "dominant hypothesis" was seriously challenged by the first-ever study of family-income mobility based on tax data (Chetty et al. 2014), which provided estimates of family-income IGEs indicating that only one-third of economic advantages are transmitted across generations and claimed that previous highly influential IGE estimates were upward biased. Using a different tax-based data set, this article provides estimates of family-income IGEs that strongly support the dominant hypothesis. The article also carries out a one-to-one comparison between IGEs estimated with the two tax-based data sets and shows that Chetty et al. 's estimates were driven downward by a combination of attenuation, life-cycle, selection, and functional-form biases. Lastly, the article determines the exact relationship between parental income inequality, economic persistence, and inequality of opportunity for income. This leads to the conclusion that, in the United States, at least half of income inequality among parents is transformed into inequality of opportunity among their children.

Intergenerational income mobility and inequality in South Korea

“…As a case in point, Koreans typically have a stronger preference for sons over daughters. Second, the different earnings distribution by gender – men's earnings are more dispersed than women's (Mitnik et al, ) – also affects the intergenerational transmission of income. Third, women's labor force participation greatly changes when they marry.…”

Childhood Family Structure and Intergenerational Income Mobility in the United States

“…I find no evidence that family income persists differently for men and women within childhood family structure groups (see also Chadwick and Solon 2002; Mitnik et al 2015). …”

“… 12 Because incomes are logged in this canonical representation of intergenerational mobility, β measures regression to the geometric mean of adult income, not the arithmetic mean (Mitnik et al 2015). Like the median, the geometric mean of right-skewed variables like income lies below the arithmetic mean.…”

On Intergenerational Immobility: Evidence That Adult Credit Health Reflects the Childhood Environment

“…Other recent work using survey data documents increased persistence over that period (Davis and Mazumder ). Mitnik et al () also find that the correlation appears to be stronger when children's outcomes are observed later in their life‐cycle—when children are in their 40s rather than in their 30s (as in Chetty et al )—suggesting that the role of family background does not diminish over time and may even grow . Several studies also examine heterogeneity within the U.S. population; however, evidence of mobility by socioeconomic group is mixed.…”

“…The correlation of economic outcomes across generations in the United States is well documented. Most recent work, which relies on administrative income data, estimates that the current level of persistence is high relative to other countries but also generally unchanged from several decades ago (Chetty et al ; Lee and Solon ; Mitnik et al ; for a review of prior work, Solon ; Black and Devereux ) . Other recent work using survey data documents increased persistence over that period (Davis and Mazumder ).…”