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Understanding the Great Gatsby Curve

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  • Steven N. Durlauf
  • Ananth Seshadri

Abstract

The Great Gatsby Curve, the observation that for OECD countries greater cross-sectional income inequality is associated with lower mobility, has become a prominent part of scholarly and policy discussions because of its implications for the relationship between inequality of outcomes and inequality of opportunities. We explore this relationship by focusing on evidence and interpretation of an intertemporal Gatsby Curve for the United States. We consider inequality/mobility relationships that are derived from nonlinearities in the transmission process of income from parents to children and the relationship that is derived from the effects of inequality of socioeconomic segregation, which then affects children. Empirical evidence for the mechanisms we identify is strong. We find modest reduced-form evidence and structural evidence of an intertemporal Gatsby Curve for the United States as mediated by social influences.

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  • Steven N. Durlauf & Ananth Seshadri, 2018. "Understanding the Great Gatsby Curve," NBER Macroeconomics Annual, University of Chicago Press, vol. 32(1), pages 333-393.
    • Handle: RePEc:ucp:macann:doi:10.1086/696058
    DOI: 10.1086/696058
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    2. Yannis M. Ioannides, 2022. "Endogenous Social Networks And Inequality In An Intergenerational Setting," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(4), pages 1691-1715, November.
    3. Lijie Song, 2022. "Examining the Relationship Between Intergenerational Upward Mobility and Inequality: Evidence from Panel Data," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 163(1), pages 1-27, August.
    4. Hyeokmoon Kweon & Casper A.P. Burik & Richard Karlsson Linner & Ronald de Vlaming & Aysu Okbay & Daphne Martschenko & Kathryn Paige Harden & Thomas A. DiPrete & Philipp D. Koellinger, 2020. "Genetic Fortune: Winning or Losing Education, Income, and Health," Tinbergen Institute Discussion Papers 20-053/V, Tinbergen Institute, revised 01 Dec 2020.
    5. Carneiro, Pedro & Reis, Hugo & Toppeta, Alessandro, 2024. "Parental Investments and Socio-Economic Gradients in Learning across European Countries," IZA Discussion Papers 16785, Institute of Labor Economics (IZA).
    6. Jan Stuhler, 2018. "A Review of Intergenerational Mobility and its Drivers," JRC Research Reports JRC112247, Joint Research Centre.
    7. N. Cordemans, 2019. "Inclusive growth: a new societal paradigm?," Economic Review, National Bank of Belgium, issue i, pages 29-50, June.
    8. Kourtellos, Andros, 2021. "The Great Gatsby Curve in education with a kink," Economics Letters, Elsevier, vol. 208(C).
    9. Andros Kourtellos & Kyriakos Petrou, 2021. "Trends and disparities in economic inequality in Cyprus and the EU," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 15(1), pages 16-45, June.
    10. Hanol Lee & Jong‐Wha Lee, 2021. "Patterns and determinants of intergenerational educational mobility: Evidence across countries," Pacific Economic Review, Wiley Blackwell, vol. 26(1), pages 70-90, February.
    11. Nathan Deutscher & Bhashkar Mazumder, 2023. "Measuring Intergenerational Income Mobility: A Synthesis of Approaches," Journal of Economic Literature, American Economic Association, vol. 61(3), pages 988-1036, September.
    12. Martín Leites & Xavier Ramos & Cecilia Rodríguez & Vilá Joan, 2022. "Intergenerational mobility along the income distribution: estimates using administrative data for a developing country," Documentos de Trabajo (working papers) 22-05, Instituto de Economía - IECON.
    13. Gallipoli, Giovanni, 2023. "Comments on unequal growth," Journal of Monetary Economics, Elsevier, vol. 133(C), pages 19-24.
    14. Eshaghnia, Sadegh S. M. & Heckman, James J. & Razavi, Goya, 2023. "Pricing Neighborhoods," IZA Discussion Papers 16234, Institute of Labor Economics (IZA).
    15. Pier-André Bouchard St-Amant & Jean-Denis Garon & Nicolas Marceau, 2020. "Uncovering Gatsby Curves," CESifo Working Paper Series 8049, CESifo.
    16. Peng, Baochun, 2021. "Positional competition: A theory of the Great Gatsby curve and the Easterlin paradox," Journal of Economic Behavior & Organization, Elsevier, vol. 186(C), pages 562-575.
    17. Eckert,Fabian & Kleineberg,Tatjana Karina, 2021. "Saving the American Dream ? Education Policies in Spatial General Equilibrium," Policy Research Working Paper Series 9574, The World Bank.
    18. Kourtellos, Andros & Marr, Christa & Tan, Chih Ming, 2020. "Local Intergenerational Mobility," European Economic Review, Elsevier, vol. 126(C).
    19. Windsteiger, Lisa, 2022. "The redistributive consequences of segregation and misperceptions," European Economic Review, Elsevier, vol. 144(C).
    20. Gangl, Markus, 2024. "Economic inequality and the cross-cutting of social circles: Evidence for a Great Gatsby curve in European marriage and partnership markets," OSF Preprints pfv6w, Center for Open Science.

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