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Earnings Mobility in the US: A New Look at Intergenerational Inequality

May 2002

Written by: Bhashkar Mazumder

Working Paper Number:

CES-02-11

Abstract

This study uses a new data set that contains the Social Security earnings histories of parents and children in the 1984 Survey of Income and Program Participation, to measure the intergenerational elasticity in earnings in the United States. Earlier studies that found an intergenerational elasticity of 0.4 have typically used only up to five-year averages of fathers' earnings to measure fathers' permanent earnings. However, dynamic earnings models that allow for serial correlation in transitory shocks to earnings imply that using such a short time span may lead to estimates that are biased down by nearly 30 percent. Indeed, by using many more years of fathers' earnings than earlier studies, the intergenerational elasticity between fathers and sons is estimated to be around 0.6 implying significantly less mobility in the U.S. than previous research indicated. The elasticity in earnings between fathers and daughters is of a similar magnitude. The evidence also suggests that family income has an even larger effect than fathers' earnings on children's future labor market success. The elasticity of earnings is higher for families with low net worth, offering some empirical support for theoretical models that predict differences due to borrowing constraints. Some evidence of a higher elasticity among blacks is found but the results are not conclusive.

Document Tags and Keywords

Keywords Keywords are automatically generated using KeyBERT, a powerful and innovative keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant keywords.

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:
economist, econometric, economically, wealth, generation, poverty, decade, mobility, regress, earner, parent, intergenerational, dependent, sociology, disparity, family, family income

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:
American Economic Association, Bureau of Labor Statistics, Social Security Administration, Ordinary Least Squares, National Longitudinal Survey of Youth, Current Population Survey, Survey of Income and Program Participation, Social Security, PSID, Summary Earnings Records

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