intergenerational poverty and mobility. intergenerational mobility leblanc’s random family how...

Intergenerational Poverty and Mobility

Intergenerational Mobility

Leblanc’s Random Family How does this excerpt relate to what we have been talking about?

Consider lecture on “Teen Pregnancy”.

How does it compare to “There Are no Children Here”?

Where and how might one intervene as a social worker or as a policy maker?


What do we mean by Intergenerational Income Mobility?

Is it better to have higher or lower intergenerational income correlation?


Father’s income

Son’s income


Measuring Intergenerational Income Mobility

child incomei= α + ρ*parent incomei + ε

ρ is the estimate of intergenerational income correlation between son’s income and their father’s.

If ρ is close to zero what would that mean? How about one?

Was often estimated to be 0.2 or less.

Solon (1992) argued that these estimates likely understated intergenerational mobility for two main reasons.


1. Measurement error in key variables. We can’t observe what we want to see, which is “permanent income” Rather, we see some indicator of “permanent income” (e.g., income in

one year)

child permanent income = child incomey + ey

parent permanent income = parent incomey + ey

Measurement error in “permanent income” will bias our estimates toward zero. Why?


Father’s income

Son’s income


2. Overly homogeneous samples These studies have often been run on strange samples due to data

constraints (fathers included only twins who served in armed forces, or Wisconsin high school grads who did not go to college).

Why might this cause trouble?


Father’s income

Son’s income


Solon tries to overcome this by:1. Using a national representative sample.

2. Using average income over a number of years to better measure “permanent” income.


So Intergenerational income mobility appears to be well above 0.4 rather than 0.2, how would we interpret this? Is it a big deal?

Under some assumptions, we can do some calculations Consider a son born to a father in the fifth income percentile (i.e., poor)

If ρ is 0.2: Likelihood of staying in bottom quintile = 0.30 Likelihood of rising above the median = 0.37 Likelihood of rising to top quintile = 0.12

If ρ is 0.4: Likelihood of staying in bottom quintile = 0.49 Likelihood of rising above the median = 0.17 Likelihood of rising to top quintile = 0.05


Chetty, Hendren, Kline, and Saez (2014) “Where is the Land of Opportunity...” Argue that Solon’s methodology might still have issues, most notably

impact of parent’s income on child’s income might be “non-linear”, so they use alternative method to measure intergenerational mobility.

Also, they are interested in whether mobility differs across different parts of the U.S.

What do they do?


Chetty, et al (2014) cont. Their alternative method for measuring intergenerational income

correlation: They have a huge sample of adult individuals and their earnings

over time, where they can link “children” with their parents via tax records.

They compute the income percentile of each “child” corresponding to where he sits in the income distribution for all the “children.” Do similar ranking for parents.

Regress child’s income rank on parent’s income rank (similar to Solon).

child percentilei= α + ρ*parent percentilei + ε


Chetty, et al (2014) cont.

child percentilei= α + ρ*parent percentilei + ε

Get an intergenerational income rank correlation coefficient (ρ) of 0.341.

Interpretation?

Is this big or small?


Chetty, et al (2014) cont. Also look at intergenerational income correlation cross “cities”.

For each “city”, they regress child’s rank in child income distribution (over whole U.S.) on parent’s rank in the parent’s income distribution (over whole U.S.).

percentilechild = αcity + ρcity*percentileparent + ε

How do you interpret the slope and intercept?


Chetty, et al (2014) cont. They then use estimates of slope and intercept for each city to calculate

expected rank of children coming from parents at any given percentile p from the national parent income distribution for each city. E.g., A child born in Chicago IL to parents in the 25th percentile of

the national income distribution (so p = 25) is expected to be in the 39th percentile of the national income distribution as an adult.

They term this the “absolute” mobility associated with each city.


Chetty, et al (2014) cont. Absolute Upward Mobility vs Relative Mobility by city.


Chetty, et al (2014) cont. Absolute Upward Mobility and Race

Intergenerational Mobility Chetty, et al (2014) cont.

Other Correlates of Absolute Upward Mobility

Direction of Causation?

Intergenerational Mobility Chetty, Hendren, Kline, Saez, Turner (2014) “Is the United States

Still A Land of Opportunity? How has mobility changed over time?

intergenerational poverty and mobility. intergenerational mobility leblanc’s random family how...

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