productivity, inequality and mobility, andrew leigh

Andrew Leigh

PRODUCTIVITY,

INEQUALITY &

MOBILITY

OECD, Paris

How Immobility Hurts Productivity

Misallocation of human capital investment

Choosing the wrong parents is “the biggest market failure

of all” (Heckman)

Misallocation of financial capital

Thin capital markets hurt entrepreneurs with poor parents.

Mismatch in the labour market

Too much emphasis on family means bad hiring decisions.

Andrew Leigh: Productivity, Inequality & Mobility

How Much Mobility Exists?

Andrew Leigh: Productivity, Inequality & Mobility

How Much Mobility Exists?

“In no other country on

earth is my story even

possible”

“It is harder today for a

child born here in

America to improve her

station in life than it is for

children in most of our

wealthy allies”

Barack Obama, 2004 Barack Obama, 2013

Andrew Leigh: Productivity, Inequality & Mobility

What Drives Mobility?

1. Inequality

2. Families

3. Schooling

4. Targeting

Several excellent review papers:

e.g. D’Addio (2008), Causa & Johansson (2009), Corak

(2013)

Andrew Leigh: Productivity, Inequality & Mobility

Mobility & Inequality

Andrew Leigh: Productivity, Inequality & Mobility

Andrew Leigh: Productivity, Inequality & Mobility

Andrew Leigh: Productivity, Inequality & Mobility

Less m

ob

ilit

y →

Andrew Leigh: Productivity, Inequality & Mobility

← L

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Mobility & Families

By the age of three, children of professional parents

have heard 30 million more words from their parents

than those whose parents were long-term welfare

recipients (Hart & Risley 1995).

‘An affluent five-year-old has about the same

vocabulary as an adult living in poverty.’ (Hank

Bounds, Mississippi commissioner of higher

education) Andrew Leigh: Productivity, Inequality & Mobility

Mobility & Families

Affluent families spend more on ‘educational

enrichment’

Rise in single parent families larger among

low-educated parents.

Concerted cultivation vs natural growth

parenting

Andrew Leigh: Productivity, Inequality & Mobility

Mobility & Schooling

Some evidence that higher returns to

education means lower mobility (Solon 2004,

Corak 2013)

Test score dispersion is associated with more

inequality (and therefore less mobility?)

Andrew Leigh: Productivity, Inequality & Mobility

Andrew Leigh: Productivity, Inequality & Mobility

Source: Corak (2013) Source: Leigh (2013)

Mobility & Targeting

Targeting could cover:

Progressivity of education spending (tricky to

measure)

Progressivity of tax system

Progressivity of welfare system

Andrew Leigh: Productivity, Inequality & Mobility

Andrew Leigh: Productivity, Inequality & Mobility

Sourc

e:

Whitefo

rd (

2014)

Empirical Challenges

Ideally, we want to look at changes on

changes

But changes in survey-based estimates are

rarely statistically significant.

Policy experiments are rare

Exception: Pekkarinen et al. (2006)

Andrew Leigh: Productivity, Inequality & Mobility

Empirical Challenges

Proxies for mobility are imperfect

Mobility estimates using parent/child education or

occupation are sensitive to the number of

categories (and degree of dispersion across

them)

Surname estimates may be capturing a

parameter (like race) that is different to mobility.

Andrew Leigh: Productivity, Inequality & Mobility

Five Possible Projects

1. Estimate small-area mobility in countries for which

good administrative data exists, then use to test

relationships with inequality and productivity.

2. Look at changes in extremely static systems (eg.

European feudalism, traditional Indian caste

system). How much of the productivity benefits of

the Industrial Revolution are mobility-related?

Andrew Leigh: Productivity, Inequality & Mobility

Five Possible Projects

3. Explore educational channel – what are the

features of school systems in mobile societies?

4. Explore family channel – what role does family

structure, parental time play in mobility?

5. Explore innovation channel – where does parental

wealth affect entrepreneurial success least? Are

there lessons from the banking system there?

Andrew Leigh: Productivity, Inequality & Mobility

Supplementary Material

Andrew Leigh: Productivity, Inequality & Mobility

Empirical Challenges

The very top is different

IGEs approach 0.9 at the top of the Swedish &

Canadian distributions.

Surname approach of Clark finds IGEs of 0.7-0.9

Chetty et al. (2014) find no relationship between

top 1% share & mobility.

Andrew Leigh: Productivity, Inequality & Mobility

Simple correlations can mislead

The case of inequality & infant mortality

Andrew Leigh: Productivity, Inequality & Mobility

AUS

AUT BEL

CAN

CZE

DNK

FIN

FRADEU

GRC

HUN

IRL

ITA

NLD

NOR

SVK

ESP

SWE

CHE

GBR

USA

46

810

Infa

nt M

ort

alit

y (

de

ath

s p

er

10

00

)

.2 .25 .3 .35 .4Gini Coefficient

AUS

BEL

CAN

FRA

DEU

ITA

NLD

NOR

ESP

SWE

CHE

GBR

USA

-4-3

.5-3

-2.5

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-.02 0 .02 .04Change in Gini

Some

disagreemen

t on trends in

US mobility

Aaronson &

Mazumder

2008

Chetty et al.

2014

Andrew Leigh: Productivity, Inequality & Mobility

Andrew Leigh: Productivity, Inequality & Mobility