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.