Family Background, Intergenerational Mobility, and Earnings Distribution: Evidence from the United States

An emerging literature in the field of income distribution suggests that inequality may persist in the long run. U.S. father and son income data extracted from the PSID support the hypothesis that the distribution of earnings of children raised in privileged environments welfare-dominates that of children of disadvantaged backgrounds. We provide the following explanations for this finding: (i) children raised in privileged backgrounds tend to have higher average earnings and more equally distributed incomes than children originated from disadvantaged environments, (ii) class inheritance is substantial for the less privileged group. On the whole though, the probability matrix of intergenerational earnings mobility exhibits a pattern of symmetry with transitions from class i to class j equally likely as movements from class j to class i.