• Print
  • Email

Working Papers, No. 2003-16, 2003
Revised Estimates of Intergenerational Income Mobility in the United States
Solon’s (1992) landmark study estimated the intergenerational elasticity (IGE) in income between fathers and sons to be 0.4 or higher. This dramatically changed the consensus view of the U.S. as a highly mobile society. In this comment, I show both analytically and empirically how Solon and others have actually underestimated this parameter by about 30 percent, suggesting that the IGE is actually close to 0.6 and that the U.S. appears to be among the least mobile countries. There are two key measurement issues that lead researchers to underestimate the IGE. First, the use of short-term averages of fathers’ earnings is a poor proxy for lifetime economic status due to highly persistent transitory shocks. Second, the variance of transitory fluctuations to earnings varies considerably by age causing a “lifecycle” bias when samples include measures of fathers’ earnings when they are especially young or old. In this comment Solon’s results are replicated and then re-estimated using a new technique that is able to address these issues using the same PSID sample. The results confirm that the intergenerational elasticity is likely to be around 0.6.
Having trouble accessing something on this page? Please send us an email and we will get back to you as quickly as we can.

Federal Reserve Bank of Chicago, 230 South LaSalle Street, Chicago, Illinois 60604-1413, USA. Tel. (312) 322-5322

Copyright © 2024. All rights reserved.

Please review our Privacy Policy | Legal Notices