Published in:FRB Chicago Working Paper ; No. 2005-12
Extent:
1 Online-Ressource (58 p)
Language:
English
DOI:
10.2139/ssrn.869435
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 2005 erstellt
Description:
We use a two-sample instrumental variables approach to estimate a time series of intergenerational economic mobility using the decennial U.S. Censuses. We find that the intergenerational income elasticity (IGE) followed a roughly U-shaped pattern from 1940 to 2000 that is similar to well known cross-sectional inequality trends. In particular, we find that intergenerational mobility (measured as 1 minus the IGE) increased from 1940 to 1980 but has declined sharply since 1980. The decline after 1980 is robust to alternative estimation approaches. This suggests that the rate of regression to the mean has been notably lower during the 1980s and 1990s compared to the three decades after WWII. Historical trends in the returns to education can only account for some of these changes in the IGE. The time pattern and the changes across birth cohorts may also help to reconcile previous findings in the literature that have used different surveys. Our estimates imply a somewhat different pattern for the intergenerational income correlation, a measure which is insensitive to changes in cross-sectional inequality and has implications for rank or positional mobility. We find that the post-1980 decline in intergenerational rank mobility marks a return to typical historical levels. At the end of the 20th century, the rate of movement of families across the income distribution across generations appears historically normal, but, as cross-sectional inequality has increased, earnings are regressing to the mean at a much slower rate, causing economic differences between families to persist longer than they had earlier in the century