IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_6473.html
   My bibliography  Save this paper

Correlations of Brothers' Earnings and Intergenerational Transmission

Author

Listed:
  • Paul Bingley
  • Lorenzo Cappellari

Abstract

Correlations between parent and child earnings reflect intergenerational mobility and, more broadly, correlations between siblings’ earnings reflect shared community and family background. These earnings relationships capture important aspects of relations in socio-economic status more generally. We estimate intergenerational transmission and sibling correlations of life-cycle earnings jointly within a unified framework that nests previous models. Using data on the Danish population of father/first-son/second-son triads we find that intergenerational effects account for on average 72 percent of sibling correlations. This share is higher than all previous studies because we allow for heterogeneous intergenerational transmission between families. Sibling correlations exhibit a U-shape over the working life, consistent with differences in human capital investments between families.

Suggested Citation

  • Paul Bingley & Lorenzo Cappellari, 2017. "Correlations of Brothers' Earnings and Intergenerational Transmission," CESifo Working Paper Series 6473, CESifo.
    • Handle: RePEc:ces:ceswps:_6473
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp6473.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Moshe Buchinsky & Jennifer Hunt, 1999. "Wage Mobility In The United States," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 351-368, August.
    2. Miles Corak & Patrizio Piraino, 2011. "The Intergenerational Transmission of Employers," Journal of Labor Economics, University of Chicago Press, vol. 29(1), pages 37-68, January.
    3. Costas Meghir & Luigi Pistaferri, 2004. "Income Variance Dynamics and Heterogeneity," Econometrica, Econometric Society, vol. 72(1), pages 1-32, January.
    4. Martin Nybom & Jan Stuhler, 2016. "Heterogeneous Income Profiles and Lifecycle Bias in Intergenerational Mobility Estimation," Journal of Human Resources, University of Wisconsin Press, vol. 51(1), pages 239-268.
    5. Björklund, Anders & Roine, Jesper & Waldenström, Daniel, 2012. "Intergenerational top income mobility in Sweden: Capitalist dynasties in the land of equal opportunity?," Journal of Public Economics, Elsevier, vol. 96(5), pages 474-484.
    6. Gordon B. Dahl & Lance Lochner, 2012. "The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit," American Economic Review, American Economic Association, vol. 102(5), pages 1927-1956, August.
    7. Øivind Anti Nilsen & Kjell Vaage & Arild Aakvik & Karl Jacobsen, 2012. "Intergenerational Earnings Mobility Revisited: Estimates Based on Lifetime Earnings," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(1), pages 1-23, March.
    8. Fatih Guvenen, 2007. "Learning Your Earning: Are Labor Income Shocks Really Very Persistent?," American Economic Review, American Economic Association, vol. 97(3), pages 687-712, June.
    9. Anders Bohlmark & Matthew J. Lindquist, 2006. "Life-Cycle Variations in the Association between Current and Lifetime Income: Replication and Extension for Sweden," Journal of Labor Economics, University of Chicago Press, vol. 24(4), pages 879-900, October.
    10. Sandra E. Black & Paul J. Devereux & Kjell G. Salvanes, 2005. "The More the Merrier? The Effect of Family Size and Birth Order on Children's Education," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 669-700.
    11. Paul Bingley & Lorenzo Cappellari & Niels Westergård‐Nielsen, 2013. "Unemployment Insurance, Wage Dynamics and Inequality Over the Life Cycle," Economic Journal, Royal Economic Society, vol. 0, pages 341-372, May.
    12. Bhashkar Mazumder, 2005. "Fortunate Sons: New Estimates of Intergenerational Mobility in the United States Using Social Security Earnings Data," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 235-255, May.
    13. Steven Haider & Gary Solon, 2006. "Life-Cycle Variation in the Association between Current and Lifetime Earnings," American Economic Review, American Economic Association, vol. 96(4), pages 1308-1320, September.
    14. Raj Chetty & John N. Friedman & Nathaniel Hilger & Emmanuel Saez & Diane Whitmore Schanzenbach & Danny Yagan, 2011. "How Does Your Kindergarten Classroom Affect Your Earnings? Evidence from Project Star," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(4), pages 1593-1660.
    15. O. Ashenfelter & D. Card (ed.), 2011. "Handbook of Labor Economics," Handbook of Labor Economics, Elsevier, edition 1, volume 4, number 4.
    16. Michael Baker & Gary Solon, 2003. "Earnings Dynamics and Inequality among Canadian Men, 1976-1992: Evidence from Longitudinal Income Tax Records," Journal of Labor Economics, University of Chicago Press, vol. 21(2), pages 267-288, April.
    17. Björklund, Anders & Jäntti, Markus & Lindquist, Matthew J., 2009. "Family background and income during the rise of the welfare state: Brother correlations in income for Swedish men born 1932-1968," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 671-680, June.
    18. O. Ashenfelter & D. Card (ed.), 2011. "Handbook of Labor Economics," Handbook of Labor Economics, Elsevier, edition 1, volume 4, number 5.
    19. Marianne E. Page & Gary Solon, 2003. "Correlations between Brothers and Neighboring Boys in Their Adult Earnings: The Importance of Being Urban," Journal of Labor Economics, University of Chicago Press, vol. 21(4), pages 831-856, October.
    20. Haider, Steven J, 2001. "Earnings Instability and Earnings Inequality of Males in the United States: 1967-1991," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 799-836, October.
    21. Ostrovsky, Yuri, 2012. "The correlation of spouses' permanent and transitory earnings and family earnings inequality in Canada," Labour Economics, Elsevier, vol. 19(5), pages 756-768.
    22. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
    23. Björklund Anders & Lindahl Lena & Lindquist Matthew J., 2010. "What More Than Parental Income, Education and Occupation? An Exploration of What Swedish Siblings Get from Their Parents," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-40, November.
    24. Mohammad Azhar Hussain & Martin D. Munk & Jens Bonke, 2009. "Intergenerational Earnings Mobilities – How Sensitive are they to Income Measures?," Journal of Income Distribution, Ad libros publications inc., vol. 18(3-4), pages 79-92, September.
    25. Dean R. Hyslop, 2001. "Rising U.S. Earnings Inequality and Family Labor Supply: The Covariance Structure of Intrafamily Earnings," American Economic Review, American Economic Association, vol. 91(4), pages 755-777, September.
    26. Behrman, Jere R & Pollak, Robert A & Taubman, Paul, 1982. "Parental Preferences and Provision for Progeny," Journal of Political Economy, University of Chicago Press, vol. 90(1), pages 52-73, February.
    27. Corcoran, Mary, et al, 1990. "Effects of Family and Community Background on Economic Status," American Economic Review, American Economic Association, vol. 80(2), pages 362-366, May.
    28. Raj Chetty & Nathaniel Hendren & Lawrence F. Katz, 2016. "The Effects of Exposure to Better Neighborhoods on Children: New Evidence from the Moving to Opportunity Experiment," American Economic Review, American Economic Association, vol. 106(4), pages 855-902, April.
    29. Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1153-1189, December.
    30. Lillard, Lee A & Weiss, Yoram, 1979. "Components of Variation in Panel Earnings Data: American Scientists, 1960-70," Econometrica, Econometric Society, vol. 47(2), pages 437-454, March.
    31. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75(4), pages 352-352.
    32. O. Ashenfelter & D. Card (ed.), 1999. "Handbook of Labor Economics," Handbook of Labor Economics, Elsevier, edition 1, volume 3, number 3.
    33. Bingley, Paul & Corak, Miles & Westergård-Nielsen, Niels C., 2011. "The Intergenerational Transmission of Employers in Canada and Denmark," IZA Discussion Papers 5593, Institute of Labor Economics (IZA).
    34. MaCurdy, Thomas E., 1982. "The use of time series processes to model the error structure of earnings in a longitudinal data analysis," Journal of Econometrics, Elsevier, vol. 18(1), pages 83-114, January.
    35. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66(4), pages 281-281.
    36. Zimmerman, David J, 1992. "Regression toward Mediocrity in Economic Stature," American Economic Review, American Economic Association, vol. 82(3), pages 409-429, June.
    37. K. Newey, Whitney, 1985. "Generalized method of moments specification testing," Journal of Econometrics, Elsevier, vol. 29(3), pages 229-256, September.
    38. Grawe, Nathan D., 2006. "Lifecycle bias in estimates of intergenerational earnings persistence," Labour Economics, Elsevier, vol. 13(5), pages 551-570, October.
    39. Dmytro Hryshko, 2012. "Labor income profiles are not heterogeneous: Evidence from income growth rates," Quantitative Economics, Econometric Society, vol. 3(2), pages 177-209, July.
    40. Tricia Gladden & Christopher Taber, 2009. "The relationship between wage growth and wage levels," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(6), pages 914-932.
    41. Baker, Michael, 1997. "Growth-Rate Heterogeneity and the Covariance Structure of Life-Cycle Earnings," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 338-375, April.
    42. Bhashkar Mazumder, 2008. "Sibling similarities and economic inequality in the US," Journal of Population Economics, Springer;European Society for Population Economics, vol. 21(3), pages 685-701, July.
    43. Hause, John C, 1980. "The Fine Structure of Earnings and the On-the-Job Training Hypothesis," Econometrica, Econometric Society, vol. 48(4), pages 1013-1029, May.
    44. Robert A. Moffitt & Peter Gottschalk, 2012. "Trends in the Transitory Variance of Male Earnings: Methods and Evidence," Journal of Human Resources, University of Wisconsin Press, vol. 47(1), pages 204-236.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:ctc:serie1:def6 is not listed on IDEAS
    2. Paul Bingley & Lorenzo Cappellari, 2012. "Alike in Many Ways: Intergenerational and Sibling Correlations of Brothers' Earnings," CESifo Working Paper Series 3994, CESifo.
    3. Markus Jäntti & Stephen P. Jenkins, 2013. "Income Mobility," SOEPpapers on Multidisciplinary Panel Data Research 607, DIW Berlin, The German Socio-Economic Panel (SOEP).
    4. Martin Nybom & Jan Stuhler, 2016. "Heterogeneous Income Profiles and Lifecycle Bias in Intergenerational Mobility Estimation," Journal of Human Resources, University of Wisconsin Press, vol. 51(1), pages 239-268.
    5. Bingley, P. & Lorenzo Cappellari, 2013. "GINI DP 57: Alike in Many Ways: Intergenerational and Sibling Correlations of Brothers’ Life- Cycle Earnings," GINI Discussion Papers 57, AIAS, Amsterdam Institute for Advanced Labour Studies.
    6. Chen, Wen-Hao & Ostrovsky, Yuri & Piraino, Patrizio, 2017. "Lifecycle variation, errors-in-variables bias and nonlinearities in intergenerational income transmission: new evidence from Canada," Labour Economics, Elsevier, vol. 44(C), pages 1-12.
    7. Koray Aktas, 2021. "Characterizing Life-Cycle Dynamics of Annual Days of Work, Wages, and Cross-Covariances," Working Papers 465, University of Milano-Bicocca, Department of Economics.
    8. Doan, Quang Hung & Nguyen, Ngoc Anh, 2016. "Intergenerational Income Mobility in Vietnam," MPRA Paper 70603, University Library of Munich, Germany.
    9. Paul Bingley & Lorenzo Cappellari & Konstantinos Tatsiramos, 2017. "Family, Community and Life-Cycle Earnings: Evidence from Siblings and Youth Peers," CESifo Working Paper Series 6743, CESifo.
    10. Dmytro Hryshko, 2012. "Labor income profiles are not heterogeneous: Evidence from income growth rates," Quantitative Economics, Econometric Society, vol. 3(2), pages 177-209, July.
    11. Mello, Ursula & Nybom, Martin & Stuhler, Jan, 2022. "A lifecycle estimator of intergenerational income mobility," Working Paper Series 2022:21, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    12. Ari Hyytinen & Pekka Ilmakunnas & Edvard Johansson & Otto Toivanen, 2019. "Heritability of lifetime earnings," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 17(3), pages 319-335, September.
    13. Lefranc, Arnaud, 2018. "Intergenerational Earnings Persistence and Economic Inequality in the Long-Run: Evidence from French Cohorts, 1931-1975," IZA Discussion Papers 11406, Institute of Labor Economics (IZA).
    14. Bertha Rohenkohl, 2019. "Intergenerational Income Mobility in the UK:New evidence using the BHPS and Understanding Society," Working Papers 2019017, The University of Sheffield, Department of Economics.
    15. Sarah Meyer & Mark Trede, 2016. "Explosive earnings dynamics: Whoever has will be given more," CQE Working Papers 4716, Center for Quantitative Economics (CQE), University of Muenster.
    16. Gustafsson, Johan & Holmberg, Johan, 2019. "Earning dynamics in Sweden: The recent evolution of permanent inequality and earnings volatility," Umeå Economic Studies 963, Umeå University, Department of Economics.
    17. Paul Bingley & Lorenzo Cappellari & Konstantinos Tatsiramos, 2014. "Family, Community and Long-Term Earnings Inequality," DISCE - Working Papers del Dipartimento di Economia e Finanza def017, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    18. Lance Lochner & Youngki Shin, 2014. "Understanding Earnings Dynamics: Identifying and Estimating the Changing Roles of Unobserved Ability, Permanent and Transitory Shocks," NBER Working Papers 20068, National Bureau of Economic Research, Inc.
    19. Robert Lucas & Sari Kerr, 2013. "Intergenerational income immobility in Finland: contrasting roles for parental earnings and family income," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(3), pages 1057-1094, July.
    20. Hayakawa, Kazuhiko, 2024. "Recent development of covariance structure analysis in economics," Econometrics and Statistics, Elsevier, vol. 29(C), pages 31-48.
    21. Joseph G. Altonji & Anthony A. Smith Jr. & Ivan Vidangos, 2013. "Modeling Earnings Dynamics," Econometrica, Econometric Society, vol. 81(4), pages 1395-1454, July.

    More about this item

    Keywords

    sibling correlations; intergenerational transmission;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_6473. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.