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How Much of Intergenerational Immobility Can be Attributed to Differences in Childhood Circumstances?

In: Mobility and Inequality Trends

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  • Rafael Carranza

Abstract

Can an estimate of the intergenerational elasticity (IGE) be interpreted as a measure of inequality of opportunity (IOp)? If parental income is the only childhood circumstance, then the answer is yes. However, parental income is one of many potential circumstances that can shape IOp. These circumstances can influence the offspring’s income indirectly – by influencing parental income – or directly, bypassing the IGE altogether. I develop a model to decompose the interaction between childhood circumstances, parental income and offspring income. Using the Panel Study of Income Dynamics for the United States, I find that childhood circumstances account for 55% of the IGE for individual earnings and 53% for family income, with parental education explaining over a third of those shares. Furthermore, the IGE misses a large part of the influence of circumstances: only 45% of the influence of parental education on the offspring’s income goes through parental income (36% for earnings).

Suggested Citation

  • Rafael Carranza, 2023. "How Much of Intergenerational Immobility Can be Attributed to Differences in Childhood Circumstances?," Research on Economic Inequality, in: Mobility and Inequality Trends, volume 30, pages 65-108, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:reinzz:s1049-258520230000030003
    DOI: 10.1108/S1049-258520230000030003
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    More about this item

    Keywords

    Intergenerational mobility; equality of opportunity; decomposition methods; circumstances; labour earnings; household income; D31; D63; J622;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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