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Journal ArticleDOI

Fortunate Sons: New Estimates of Intergenerational Mobility in the United States Using Social Security Earnings Data

01 May 2005-The Review of Economics and Statistics (MIT press journals)-Vol. 87, Iss: 2, pp 235-255
TL;DR: This article found that intergenerational mobility is significantly lower for families with little or no wealth, offering empirical support for theoretical models that predict differences due to borrowing constraints, suggesting that the United States is substantially less mobile than previous research indicated.
Abstract: Previous studies, relying on short-term averages of fathers' earnings, have estimated the intergenerational elasticity (IGE) in earnings to be approximately 0.4. Due to persistent transitory fluctuations, these estimates have been biased down by approximately 30% or more. Using administrative data containing the earnings histories of parents and children, the IGE is estimated to be around 0.6. This suggests that the United States is substantially less mobile than previous research indicated. Estimates of intergenerational mobility are significantly lower for families with little or no wealth, offering empirical support for theoretical models that predict differences due to borrowing constraints.
Citations
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Journal ArticleDOI
TL;DR: In this article, the authors use administrative records on the incomes of more than 40 million children and their parents to describe three features of intergenerational mobility in the United States: the joint distribution of parent and child income at the national level, the conditional expectation of child income given parent income, and the factors correlated with upward mobility.
Abstract: We use administrative records on the incomes of more than 40 million children and their parents to describe three features of intergenerational mobility in the United States. First, we characterize the joint distribution of parent and child income at the national level. The conditional expectation of child income given parent income is linear in percentile ranks. On average, a 10 percentile increase in parent income is associated with a 3.4 percentile increase in a child’s income. Second, intergenerational mobility varies substantially across areas within the U.S. For example, the probability that a child reaches the top quintile of the national income distribution starting from a family in the bottom quintile is 4.4% in Charlotte but 12.9% in San Jose. Third, we explore the factors correlated with upward mobility. High mobility areas have (1) less residential segregation, (2) less income inequality, (3) better primary schools, (4) greater social capital, and (5) greater family stability. While our descriptive analysis does not identify the causal mechanisms that determine upward mobility, the publicly available statistics on intergenerational mobility developed here can facilitate research on such mechanisms. The opinions expressed in this paper are those of the authors alone and do not necessarily reect

1,911 citations

Journal ArticleDOI
TL;DR: This paper conducted a meta-analysis of the longitudinal studies that have investigated intelligence as a predictor of success (as measured by education, occupation, and income) in order to better evaluate the predictive power of intelligence, also including meta-analyses of parental socioeconomic status (SES) and academic performance (school grades).

782 citations

Posted Content
TL;DR: The authors found that the relationship between current and lifetime earnings departs substantially from the textbook errors-in-variables model in ways that vary systematically over the life cycle, which can enable more appropriate analysis of and correction for errors in variance bias in a wide range of research that uses current earnings to proxy for lifetime earnings.
Abstract: Researchers in a variety of important economic literatures have assumed that current income variables as proxies for lifetime income variables follow the textbook errors-in-variables model. In an analysis of Social Security records containing nearly career-long earnings histories for the Health and Retirement Study sample, we find that the relationship between current and lifetime earnings departs substantially from the textbook model in ways that vary systematically over the life cycle. Our results can enable more appropriate analysis of and correction for errors-in-variables bias in a wide range of research that uses current earnings to proxy for lifetime earnings.

687 citations

Journal ArticleDOI
TL;DR: This article found that the relationship between current and lifetime earnings departs substantially from the textbook errors-in-variables model in ways that vary systematically over the life cycle, which can enable more appropriate analysis of, and correction for, errors in variance bias in any research that uses current earnings to proxy for lifetime earnings.
Abstract: Researchers in a variety of important economic literatures have assumed that current income variables as proxies for lifetime income variables follow the textbook errors-in-variables model. In our analysis of Social Security records containing nearly career-long earnings histories for the Health and Retirement Study sample, we find that the relationship between current and lifetime earnings departs substantially from the textbook model in ways that vary systematically over the life cycle. Our results can enable more appropriate analysis of, and correction for, errors-in-variables bias in any research that uses current earnings to proxy for lifetime earnings. (JEL D31, D91)

552 citations

Journal ArticleDOI
TL;DR: In this paper, the authors make more efficient use of the available information in the Panel Study of Income Dynamics, and generate more reliable estimates of the recent time-series variation in intergenerational mobility.
Abstract: Previous studies of recent U.S. trends in intergenerational income mobility have produced widely varying results, partly because of large sampling errors. By making more efficient use of the available information in the Panel Study of Income Dynamics, we generate more reliable estimates of the recent time-series variation in intergenerational mobility. Our results, which pertain to the cohorts born between 1952 and 1975, do not reveal major changes in intergenerational mobility.

433 citations

References
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Journal ArticleDOI
TL;DR: The theory of inequality and intergenerational mobility presented in this paper assumes that each family maximizes a utility function spanning several generations, which depends on the consumption of parents and on the quantity and quality of their children.
Abstract: The theory of inequality and intergenerational mobility presented in this essay assumes that each family maximizes a utility function spanning several generations. Utility depends on the consumption of parents and on the quantity and quality of their children. The income of children is raised when they receive more human and nonhuman capital from their parents. Their income is also raised by their "endowment" of genetically determined race, ability, and other characteristics, family reputation and "connections," and knowledge, skills, and goals provided by their family environment. The fortunes of children are linked to their parents not only through investments but also through these endowments acquired from parents (and other family members). The equilibrium income of children is determined by their market and endowed luck, the own income and endowment of parents, and the two parameters, the degree of inheritability and the propensity to invest in children. If these parameters are both less than unity, ...

2,000 citations

Posted Content
TL;DR: For example, this article showed that the intergenerational correlation in long-run income is at least 0.4, indicating dramatically less mobility than suggested by earlier research, indicating less mobility.
Abstract: Social scientists and policy analysts have long expressed concern about the extent of intergenerational income mobility in the United States, but remarkably little empirical evidence is available. The few existing estimates of the intergenerational correlation in income have been biased downward by measurement error, unrepresentative samples, or both. New estimates based on intergenerational data from the Panel Study of Income Dynamics imply that the intergenerational correlation in long-run income is at least 0.4, indicating dramatically less mobility than suggested by earlier research. Copyright 1992 by American Economic Association.

1,710 citations


"Fortunate Sons: New Estimates of In..." refers background or methods or result in this paper

  • ...30 This estimate for Solon is the average of the results found in table 2, column 2, of Solon (1992)....

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  • ...The average age of the children is 31, which is similar to the averages 29.6 reported by Solon (1992) and 33.8 reported by Zimmerman (1992)....

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  • ...14 See footnote 16 in Solon (1992)....

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  • ...Couch and Lillard (1998) argue that the results of Solon (1992) and Zimmerman (1992) are sensitive to the inclusion of years of zero earnings....

    [...]

  • ...Inasmuch as it is possible that fathers’ education has an independent, and presumably positive, effect on sons’ earnings, the IV estimate may not be consistent, but it arguably serves as an upper bound (Solon, 1992)....

    [...]

Posted ContentDOI
TL;DR: This paper showed the importance of cognitive and non-cognitive skills that are formed early in the life cycle in accounting for racial, ethnic and family background gaps in schooling and other dimensions of socioeconomic success.
Abstract: This paper considers alternative policies for promoting skill formation that are targeted to different stages of the life cycle. We demonstrate the importance of both cognitive and noncognitive skills that are formed early in the life cycle in accounting for racial, ethnic and family background gaps in schooling and other dimensions of socioeconomic success. Most of the gaps in college attendance and delay are determined by early family factors. Children from better families and with high ability earn higher returns to schooling. We find only a limited role for tuition policy or family income supplements in eliminating schooling and college attendance gaps. At most 8% of American youth are credit constrained in the traditional usage of that term. The evidence points to a high return to early interventions and a low return to remedial or compensatory interventions later in the life cycle. Skill and ability beget future skill and ability. At current levels of funding, traditional policies like tuition subsidies, improvements in school quality, job training and tax rebates are unlikely to be effective in closing gaps.

1,656 citations

Journal ArticleDOI
TL;DR: In this paper, an alternative to maximum likelihood estimation of the parameters of the censored regression (or censored 'Tobit' model) is proposed, which is a generalization of least absolute deviations estimation for the standard linear model, and is also robust to heteroscedasticity.

1,316 citations

Journal ArticleDOI
TL;DR: The authors found that the long-run factors associated with parental background and family environment, and not credit constraints facing prospective students in the college-going years, account for most of the racial and ethnic disparities in college attendance.
Abstract: This paper estimates a dynamic model of schooling attainment to investigate the sources of racial and ethnic disparity in college attendance. Parental income in the child’s adolescent years is a strong predictor of this disparity. This is widely interpreted to mean that credit constraints facing families during the college‐going years are important. Using NLSY data, we find that it is the long‐run factors associated with parental background and family environment, and not credit constraints facing prospective students in the college‐going years, that account for most of the racial‐ethnic college‐going differential. Policies aimed at improving these long‐term family and environmental factors are more likely to be successful in eliminating college attendance differentials than short‐term tuition reduction and family income supplement policies aimed at families with college age children.

1,004 citations