the intergenerational earnings and income mobility of canadian men evidence from longitudinal income tax data our objective is to obtain an accurate estimate of the degree of intergenerational income mobility in canada we use income tax information on about 400 000 father son pairs and find intergenerational earnings elasticities to be about 0 2 earnings mobility tends to be slightly greater than income mobility but nonparametric techniques uncover significant nonlinearities in both of these relationships intergenerational earnings mobility is greater at the lower end of the income distribution than at the upper end and displays an inverted v shape elsewhere intergenerational income mobility follows roughly the same pattern but is much lower at the very top of the income distribution

beauty and the labor market the authors examine the impact of looks on earnings using interviewers ratings of respondents physical appearance plain people earn less than average looking people who earn less than the good looking the plainness penalty is 5 to 10 percent slightly larger than the beauty premium effects for men are at least as great as for women unattractive women have lower labor force participation rates and marry men with less human capital better looking people sort into occupations where beauty may be more productive but the impact of individuals looks is mostly independent of occupation suggesting the existence of pure employer discrimination copyright 1994 by american economic association

direct tests of the reservation wage property this paper provides the first direct experimental tests of the reservation wages predicted by finite horizon job search models previous indirect tests were based on search duration and search income the authors show that such indirect tests are weak by demonstrating that a naive rule performs essentially as well as the risk neutral model in predicting search duration in contrast direct tests of predicted reservation wages imply rejections of both the naive rule and the risk neutral model the general concave model survives direct tests with reservation wage data as does a specific logistic concave model copyright 1992 by royal economic society

on the distributional consequences of epidemics we develop a tractable general theory for the study of the economic and demographic impact of epidemics notably its distributional consequences to this end we build up a three period overlapping generations model where altruistic parents choose optimal health expenditures for their children and themselves the survival probability of adults and children depends on such investments agents can be skilled or unskilled in this paper epidemics are modeled as one period exogenous shocks to the adults survival rates we first show that such epidemics have permanent effects on the size of population and on the level of output however the income distribution is shown to be unaltered in the long run second we show that this distribution may be significantly altered in the medium term in particular the proportion of the unskilled will necessarily increase at that term if orphans are too penalized in the access to education c 2009 elsevier b v all rights reserved

the determinants of earnings a behavioral approach we survey the determinants of earnings and propose a framework for understanding labor market success we suggest that the advantages of the children of successful parents go considerably beyond the benefits of superior education the inheritance of wealth or the genetic inheritance of cognitive ability we suggest that noncognitive personality variables such as attitudes towards risk ability to adapt to new economic conditions hard work and the rate of time preference affect both earning and the transmission of economic status across generations

an econometric analysis of reservation wages this paper describes an analysis of survey data on unemployed people who reported their asking wage and the wage they expected to earn we show that if agents behavior is described by the standard optimal job search model one can use these data to deduce structural parameters rather than estimate them and we report our deductions from two surveys 1 of british unemployed people

intergenerational income mobility in the united states social scientists and policy analysts have long expressed concern about the extent of intergenerational income mobility in the united states but remarkably little empirical evidence is available the few existing estimates of the intergenerational correlation in income have been biased downward by measurement error unrepresentative samples or both new estimates based on intergenerational data from the panel study of income dynamics imply that the intergenerational correlation in long run income is at least 0 4 indicating dramatically less mobility than suggested by earlier research copyright 1992 by american economic association

economic interpretations of intergenerational correlations science itself for example see galton s 1869 study of the eminence of relatives or his 1889 analysis of the heights of parents and children but extensive use of economic theory to interpret these correlations is much more recent using basic economic concepts such as supply demand investment incentives missing markets and so on theorists hope to explain how and why status is correlated across generations economic theory might provide a unified treatment of a variety of socioeconomic indicators such as earnings income occupation or wealth or it might predict how taxes subsidies and economic regulation affect intergenerational mobility and the operation of markets however while the subject matter earnings consumption wealth occupa tion is clearly interesting to economists it could nonetheless be the case that beyond basic questions of measurement economic theory has not improved our understanding of intergenerational mobility goldberger 1989 is quite explicit in this contention by emphasizing the distinction between genes and environment and by using statistical theory as its main analytical tool the paper by samuel bowles and herbert gintis in this issue implicitly concurs with goldberger we take this challenge very seriously what characterizes an economic approach to mobility while biologists and bowles and gintis distinguish endowments and investments by their source genetic versus environmental factors one focus of economic theorists is motiva

perceptions of equity and the distribution of income this article develops a model in which quit rates and thus the income distribution depend on employee perceptions of the accuracy of employer assessments of individual productivity because these latter assessments affect wages when employees believe that these assessments are accurate income inequality tends to be high the model can account for the negative correlation across some countries of inequality and the extent to which inequality is deemed to be excessive it also fits the contrast in u s and french experiences concerning the tenure of highly educated workers with high wages relative to the tenure of lower paid workers

economic and mechanical models of intergenerational transmission the author critically examines gary beckers attempt to integrate the theory of income distribution intragenerational differences with the theory of mobility intergenerational differences in an economic model of the family he assesses beckers claims of distinctiveness integration explanatory power and surprise and arrives at a rather skeptical view of the contribution that the core of microeconomics has made to this study of the family a reply by becker is included pp 514 8 excerpt

understanding preferences for income redistribution abstract recent research suggests that income redistribution preferences vary across identity groups we employ statistical learning methods that emphasize pattern recognition classification and regression trees cart and random forests randomforests to uncover what these groups are using data from the general social survey we find that out of a large set of identity markers only race gender age and socioeconomic class are important classifiers for income redistribution preferences further the uncovered identity groupings are characterized by complex patterns of interaction amongst these salient classifiers we explore the extent to which existing theories of income redistribution can explain our results but conclude that current approaches do not fully explain the findings

estimates of the economic returns to schooling from a new sample of twins this paper uses a new survey to contrast the wages of genetically identical twins with different schooling levels multiple measurements of schooling levels were also collected to assess the effect of reporting error on the estimated economic returns to schooling the data indicate that omitted ability variables do not bias the estimated return to schooling upward but that measurement error does bias it downward adjustment for measurement error indicates that an additional year of schooling increases wages by 12 to 16 percent a higher estimate of the economic returns to schooling than has been previously found copyright 1994 by american economic association

the intergenerational transmission of risk and trust attitudes recent theories endogenize the attitude endowments of individuals assuming that they are shaped by the attitudes of parents and other role models this paper tests empirically for the relevance of three aspects of the attitude transmission process highlighted in this theoretical literature 1 transmission of attitudes from parents to children 2 an impact of prevailing attitudes in the local environment on child attitudes and 3 positive assortative mating of parents which enhances the ability of a parent to pass on his or her attitudes to the child we focus on two fundamentally important attitudes willingness to take risks and willingness to trust others we find empirical support for all three aspects providing an empirical underpinning for the literature an investigation of underlying mechanisms shows that socialization is important in the transmission process various parental characteristics and aspects of family structure are found to strengthen the socialization process with implications for modeling the socialization production function and for policies focused on affecting children s non cognitive skills the paper also provides evidence that the transmission of risk and trust attitudes affects a wide variety of child outcomes implying a potentially large total effect on children s economic situation

escaping poverty and becoming poor who gains who loses and why abstract different households have followed very different economic trajectories this study of 35 north indian villages shows members of 11 1 of 6 376 households in these villages have overcome poverty in the last 25 years while members of another 7 9 have fallen into poverty households escape from poverty is assisted by one set of factors but an entirely different set of factors is associated with households decline two distinct sets of policies are required thus one set to promote escape from poverty and another set to arrest decline into poverty poverty has some distinctly local antecedents a methodology for tracking changes in poverty at the local level is developed that community groups and others can use to assess change and examine causes

family economics and macro behavior in this 1987 presidential address to the american economic association the author explores the contributions of the field of family economics to macroeconomic analysis the focus is on family behavior as an active endogenous factor that both affects and is affected by the evolution of the economy much of the time is spent on long term economic growth although i also discuss short and long cycles in economic activity and the interaction between overlapping generations through social security transmission of inequality and in other ways many conclusions in these and presumably other macro areas change radically when family choices get the attention they deserve excerpt

an examination of personality in occupational outcomes antagonistic managers careless workers and extraverted salespeople abstractthis article investigates the role of personality in the sorting of individuals between a number of occupations allowing for an extensive array of conditioning variables the focus is an examination of the relationship between occupational outcomes and personality using the five factor model we estimate a multinomial logit model using a panel data set from the household income and labour dynamics in australia hilda survey human capital variables are found to exhibit strong credentialism effects and there is evidence for some small dynasty hysteresis personality effects are found to be significant relatively large and persistent across all occupations the personality effects are strong enough to rival that of various education credentials these personality effects include but are not limited to managers being less agreeable and more antagonistic labourers being less conscientiousness and salespeople being more extraverted

public education and redistribution when talents are mismatched in democratic countries elected policymakers determine public spending the level of public spending depends on taxes that are decided by a voting mechanism policymakers also decide how to allocate funds among different policies such as public education and pure redistributive transfers how are the levels of funding for public education and redistribution determined in the political process what impacts do votes on these two policies have on inequality growth and social mobility we develop a politico economic model that highlights a novel mechanism public education provides opportunities for the children of the poor to be recognized for their talent this reduces the probability of a mismatch which takes place when individuals with low talent who come from rich families find jobs that should go to people with high talent and vice versa hence the poor may prefer public spending on education to direct redistribution while the rich prefer redistribution as education implies more competition for good jobs from the poor

the survival of the welfare state this paper provides an analytical characterization of markov perfect equilibria in a model with repeated voting where agents vote over distortionary income redistribution a key result is that the future constituency for redistributive policies depends positively on current redistribution since this affects both private investments and the future distribution of voters the model features multiple equilibria in some equilibria positive redistribution persists forever in other equilibria even a majority of beneficiaries of redistribution vote strategically so as to induce the end of the welfare state next period skill biased technical change makes the survival of the welfare state less likely

risk attitudes and reservation wages of unemployed workers evidence from panel data abstract this paper studies risk attitudes of unemployed job seekers and their relationship to self reported reservation wages we find that risk aversion is prevalent and that reservation wages decrease slightly over time furthermore risk aversion and reservation wages are negatively correlated

a nonparametric nonclassical measurement error approach to estimating intergenerational mobility elasticities this article provides a framework for estimating intergenerational mobility elasticities iges of children s income with respect to parental income we allow the iges to be heterogeneous by leavi

equality of opportunity and luck definitions and testable conditions with an application to income in france abstract we offer a model of equality of opportunity that encompasses different conceptions expressed in the public and philosophical debates in addition to circumstances whose effect on outcome should be compensated and effort which represents a legitimate source of inequality we introduce a third factor luck that captures the random factors whose impact on outcome should be even handed for equality of opportunity to be satisfied then we analyze how the various definitions of equality of opportunity can be empirically identified given data limitations and provide testable conditions definitions and conditions resort to standard stochastic dominance tools lastly we develop an empirical analysis of equality of opportunity for income acquisition in france over the period 1979 2000 which reveals that the degree of inequality of opportunity tends to decrease and that the degree of risk of income distributions conditional on social origin appears very similar across all groups of social origins

stochastic monotonicity in intergenerational mobility tables summary the aim of this paper is to test for stochastic monotonicity in intergenerational socio economic mobility tables in other words we question whether having a parent from a high socio economic status is never worse than having one with a lower status using existing inferential procedures for testing unconditional stochastic monotonicity we first test a set of 149 intergenerational mobility tables in 35 different countries and find that monotonicity cannot be rejected in hardly any table in addition we propose new testing procedures for testing conditional stochastic monotonicity and investigate whether monotonicity still holds after conditioning on a number of covariates such as education cognitive and non cognitive skills based on the ncds cohort data from the uk our results provide evidence that monotonicity holds even conditionally moreover we do not find large differences in our results when comparing social class and wage class mobility copyright 2010 john wiley sons ltd

the intergenerational causal effect of tax evasion evidence from the commuter tax allowance in austria does tax evasion run in the family to answer this question we study the case of the commuter tax allowance in austria this allowance is designed as a step function of the distance between the residence and the workplace creating sharp discontinuities at each bracket threshold the distance to these brackets is a strong determinant of compliance since it corresponds to the probability of detection the match of different administrative data sources allows us to observe actual compliance behavior at the individual level across two generations to identify the intergenerational causal effect in tax evasion behavior we use the paternal distance to bracket as an instrumental variable for paternal compliance we find that paternal noncompliance increases children s non compliance by about 20 percent

intergenerational mobility and macroeconomic history dependence a large literature on endogenous inequality has argued that persistent differences in macroeconomic performance across countries can be explained by historical inequality owing to indivisibilities in occupational choice and borrowing constraints these models are characterized by homogenous agents a continuum of steady states sss and lack of mobility in every ss we show that introducing even a little heterogeneity in order to generate ss mobility shrinks the ss set dramatically mobile sss are generically locally unique and finite in number sufficient conditions for global uniqueness and convergence of competitive equilibrium dynamics are provided

social mobility and inequality in urban china understanding the role of intergenerational transmission of education china s rapid economic growth since the late 1980s has been accompanied by great economic and social transformations which have resulted in a sharp increase in income inequality this article contributes to the literature of social mobility in china by examining the impact of parental education on the education of their children using the 1990 and 2000 chinese population censuses we employ nonparametric estimation strategies to provide a systematic investigation of intergenerational transmission of education in urban china we find evidence of increasing parents children educational correlations our results raise concerns regarding economic inequality in urban china as high intergenerational persistence of education is expected to be a barrier to equal opportunities in children s education attainments and their future labour market outcomes

homogeneity masquerading as variety the case of horizontal innovation models the literature on horizontal innovation claims to analyse cases where unbounded endogenous growth comes from an increasing variety of intermediate goods the present paper contends that a good sample of representative models in this literature share two essential assumptions regarding production technology and that these assumptions together amount to assuming the homogeneity of various intermediate goods in these models there is no variety of intermediate goods to increase owing to rd what increases is a mass of a single homogeneous intermediate good

substitution and complementarity in endogenous innovation the influence of joseph schumpeter s notion of creative destruction may have led to an overemphasis on substitution between technologies in recent models of endogenous innovation historical examples of technological change suggest that new technologies may just as frequently complement older technologies creating rather than destroying rents acknowledgement of the potential for both substitution and complementarity among inventions allows for a much richer characterization of the growth process creating the possibility of threshold effects and multiple equilibria and bringing to the forefront the important role played by the expectations of inventive entrepreneurs

the importance of noncognitive skills lessons from the ged testing program it is common knowledge outside of academic journals that motivation tenacity trustworthiness and perseverance are important traits for success in life thomas edison wrote that genius is 1 percent inspiration and 99 percent perspiration most parents read the aesop fable of the tortoise and the hare to their young children at about the same time they read them the story of the little train that could numerous instances can be cited of high iq people who failed to achieve success in life because they lacked self discipline and low iq people who succeeded by virtue of persistence reliability and self discipline the value of trustworthiness has recently been demonstrated when market systems were extended to eastern european societies with traditions of corruption and deceit it is thus surprising that academic discussions of skill and skill formation almost exclusively focus on measures of cognitive ability and ignore noncognitive skills the early literature on human capital e g gary becker 1964 contrasted cognitive ability models of earnings with human capital models ignoring noncognitive traits entirely the signaling literature e g michael spence 1974 emphasized that education was a signal of a one dimensional ability usually interpreted as a cognitive skill most discussions of ability bias in the estimated return to education treat omitted ability as cognitive ability and attempt to proxy the missing ability by cognitive tests most assessments of school reforms stress the gain from reforms as measured by the ability of students to perform on a standardized achievement test widespread use of standardized achievement and ability tests for admissions and educational evaluation are premised on the belief that the skills that can be tested are essential for success in schooling a central premise of the educational testing movement since its inception much of the neglect of noncognitive skills in analyses of earnings schooling and other lifetime outcomes is due to the lack of any reliable measure of them many different personality and motivational traits are lumped into the category of noncognitive skills psychologists have developed batteries of tests to measure noncognitive skills e g robert sternberg 1985 these tests are used by companies to screen workers but are not yet used to ascertain college readiness or to evaluate the effectiveness of schools or reforms of schools the literature on cognitive tests ascertains that one dominant factor g summarizes cognitive tests and their effects on outcomes no single factor has yet emerged to date in the literature on noncognitive skills and it is unlikely that one will ever be found given the diversity of traits subsumed under the category of noncognitive skills studies by samuel bowles and herbert gintis 1976 rick edwards 1976 and roger klein et al 1991 demonstrate that job stability and dependability are traits most valued by employers as ascertained by supervisor ratings and questions of employers although they present no direct evidence on wages and educational t discussants susan mayer university of chicago cecilia rouse princeton university nan maxwell california state university hayward janet currie university of california los angeles

fair inequality attitudes toward pay differentials the united states in comparative perspective are american attitudes toward economic inequality different from those in other countries one tradition in sociology suggests american exceptionalism while another argues for convergence across

market imperfections and the instability of open economies in the presence of small market imperfections the transitional dynamics of an open economy can become indeterminate in that there exist an infinite number of equilibrium paths converging to a unique steady state in contrast to closed economy models in the open economy such indeterminacy can arise independently of the curvature of the utility function in consumption the results suggest that with market imperfections open economies can be subject to fluctuations caused by randomness unrelated to the economy s fundamentals

regression toward mediocrity in economic stature this paper provides estimates of the correlation in lifetime earnings between fathers and sons intergenerational data from the national longitudinal survey are used earlier studies conducted for the united states report elasticities of children s earnings with respect to parent s earnings of 0 2 or less suggesting extensive integenerational mobility these estimates however are biased downward by error contaminated measures of lifetime economic status estimates presented in this paper correct for the problem of measurement error and find the intergenerational correlation in income to be on the order of 0 4 this suggests considerably less intergenerational mobility than previously believed jel j62

the gender wage gap and the role of reservation wages new evidence for unemployed workers this paper examines the importance of differences in reservation wages for the gender wage gap based on two waves of rich survey data for a sample of newly unemployed individuals in germany we perform a decomposition analysis including measures for reservation wages detailed information on education socio demographics labor market history as well as personality traits in order to address the potential endogeneity of reservation wages we exploit a generated instrumental variable strategy that relies on heteroscedasticity of the error terms our findings indicate that the gender wage gap becomes small and statistically insignificant once we control for reservation wages moreover we perform a subgroup analysis that provides valuable insights about the importance of potentially unobserved characteristics that affect reservation wages and realized wages simultaneously reasons for differences in reservation wages could arise from productivity differences the fact that women anticipate discrimination and different unobserved traits or preferences

converting asset holdings into livelihood an empirical study on the role of household agency in south africa summary this paper analyzes the complexities of converting assets into livelihood and the role that agency constraints play drawing inspiration from the capabilities approach and using household data from south africa linkages between assets and agency are identified by decomposing asset endowments impact on future livelihood by employing a method of path analysis akin to early heritability of traits studies theoretical asset based studies of chronic poverty are bridged with capabilities literatures the interaction between assets and agency is shown to be as important as asset to asset complementarities the results have wide ranging policy implications

local intergenerational mobility abstract using nlsy data we investigate whether the observed patterns of economic mobility as measured by income and educational attainment exhibit heterogeneity across socioeconomic groups and whether the nature of the heterogeneity can be explained by different levels of persistence in the intergenerational transmission of cognitive and non cognitive abilities across these groups in doing so we employ the varying coefficient model vcm to estimate nonparametric local measures of intergenerational mobility of those outcome variables by local we mean that the persistence coefficients are modeled as smooth functions of log parental permanent income our findings show that intergenerational mobility exhibits nonlinear patterns individuals with different parental income are characterized by different degrees of intergenerational mobility moreover we find evidence that suggests cognitive abilities play a role in explaining intergenerational mobility these findings provide some support for a new class of family investment models that emphasize the role of such abilities in economic mobility

the relation between return and income this paper presents evidence that the corporate stock owned by high income investors appreciates substantially faster than the stock owned by investors with lower incomes the evidence indicates that the differences are large and that they have persisted for a long period of time some potential explanations of this phenomenon are discussed and it seems that the best explanation is that the rich have a higher tendency to invest in risky stock

investments into education doing as the parents did abstract empirical evidence suggests that parents with higher levels of education generally attach a higher importance to the education of their children this implies an intergenerational chain transmitting the attitude towards the formation of human capital from one generation to the next we incorporate this intergenerational chain into an olg model with endogenous human capital formation in absence of any state intervention such an economy might be characterized by multiple steady states with low or high human capital levels there are also steady states where the population is permanently divided into different groups with differing human capital and welfare levels compulsory schooling is needed to overcome steady states with low human capital and welfare levels tax financed education subsidies can lead to further pareto improvements

political self serving bias and redistribution we explore the impact of the self serving bias on the supply and demand for redistribution we present results from an experiment in which participants decide on redistribution after performing a real effort task dependent on individual performance participants are divided into two groups successful and unsuccessful participants success is exogenously determined because they are randomly assigned to either a hard or easy task however because participants are not told which task they were assigned to there is ambiguity as to whether success or failure should be attributed to internal or external factors participants take two redistribution decisions first they choose a supply of redistribution in a situation where no personal interests are at stake second they choose a redistributive system behind a veil of ignorance our results confirm and expand previous findings on the self serving bias successful participants are more likely to attribute their success to their effort rather than luck and they opt for less redistribution unsuccessful participants tend to attribute their failure to external factors and opt for more redistribution we demonstrate that the self serving bias contributes to a polarization of the views on redistribution

intergenerational wealth mobility and the role of inheritance evidence from multiple generations this study estimates intergenerational correlations in mid life wealth across three generations and a young fourth generation and examines how much of the parent child association that can be explained by inheritances using a swedish data set we find parent child rank correlations of 0 3 0 4 and grandparents grandchild rank correlations of 0 1 0 2 conditional on parents wealth grandparents wealth is weakly positively associated with grandchild s wealth and the parent child correlation is basically unchanged if we control for grandparents wealth bequests and gifts strikingly account for at least 50 per cent of the parent child wealth correlation while earnings and education are only able to explain 25 per cent

the culture of entrepreneurship abstract we study the cultural process through which a society inculcates an entrepreneurial spirit people work for a guaranteed wage or operate a firm whose risky return depends on business expertise the latter is culturally acquired within the family or outside and people may choose an occupation different from the one they were socialized into a cultural bias towards safer occupations from colonial and post colonial policies leads to stagnation where entrepreneurs do not upgrade technology because of their proficiency with existing methods an aggregate productivity shock can tip this economy towards growth led by established businesses a human capital shock where existing business expertise is less useful is more disruptive growth occurs through the emergence of a new class of entrepreneurs we conclude that culture is not destiny it adapts even when some cultural traits do not

social preferences self interest and the demand for redistribution preferences for redistribution may be influenced by values and beliefs about distributive justice as well as by self interest people may prefer more redistribution to the poor if they believe that poverty is caused by circumstances beyond individual control therefore beliefs about the causes of income may affect demand for redistribution alternatively the effect of these beliefs on redistributive preferences may be spurious if they are correlated with income and self interest is not properly controlled for they may also measure incentive cost concerns using social survey data i find that self interest cannot explain the effect of these beliefs on redistributive preferences 2001 elsevier science b v all rights reserved

the inheritance of inequality how level is the intergenerational playing field what are the causal mechanisms that underlie the intergenerational transmission of economic status are these mechanisms amenable to public policies in a way that would make the attainment of economic success more fair these are the questions we will try to answer

a review of gregory clark s a farewell to alms a brief economic history of the world a farewell to alms advances striking claims about the economic history of the world these include 1 the preindustrial world was in a malthusian preventive check equilibrium 2 living standards were unchanging and above subsistence for the last 100 000 years 3 bad institutions were not the cause of economic backwardness 4 successful economic growth was due to the spread of middle class values from the elite to the rest of society for biological reasons 5 workers were the big gainers in the british industrial revolution and 6 the absence of middle class values for biological reasons explains why most of the world is poor the empirical support for these claims is examined and all are questionable

decomposing economic mobility transition matrices the intergenerational mobility literature has consistently found that the distribution of adult economic outcomes differ markedly depending on parental economic status yet much remains to be understood about the drivers or determinants of this relationship existing literature on potential drivers focuses primarily on mean effects to help provide a more complete picture of the potential forces driving economic persistence we propose a method to decompose transition matrices and related indices specifically we decompose differences between an estimated transition matrix and a benchmark transition matrix into portions attributable to differences in characteristics between individuals from different households a composition effect and portions attributable to differing returns to these characteristics between individuals from different households a structure effect we also incorporate a detailed decomposition based on copula theory that decomposes the composition effect into portions attributable to specific covariates and their interactions we illustrate our method using data on white men from the 1979 national longitudinal survey of youth estimation is based on an extended mincer equation that includes cognitive and non cognitive measures to address the potential endogeneity of education we implement an iv strategy that allows us to estimate causal effects and investigate the role of unobserved ability

social class family background and intergenerational mobility abstract this research examines the various approaches taken by economists and sociologists for analyzing intergenerational mobility social mobility models based on social classes arising from an occupational classification scheme are analysed a test for the statistical validity of classification schemes is proposed and tested using danish sample survey data that was first collected in 1976 and augmented in 2000 this is referred to as a homogeneity test and is a likelihood ratio test of a set of linear restrictions which define social classes for denmark it is shown that this test fails for an erikson goldthorpe classification system raising doubts about the statistical validity of occupational classification systems in general we also estimate regression models of occupational earnings household earnings and educational attainment using family background variables as covariates controlling for unobservables measurement error and simultaneous equation bias in these models homogeneity tests are also rejected we conclude from these results that the individual s family background has a small but significant impact on lifetime chances which is not captured by the erikson goldthorpe classification scheme

capital and interest in horizontal innovation models a typical horizontal innovation model has three sequentially connected sectors i argue that this structure of the model necessitates the compounding of interest on an input that goes through multiple production periods before the final good is produced this aspect is missed or deliberately assumed away in typical horizontal innovation models and i contend that this practice generates internal inconsistency in relation to the long run nature of the models i propose the correction which will restore internal consistency and discuss its implications though discussion is carried out in particular reference to barro and sala i martin s labequipment model implications are general

ethnicity neighborhoods and human capital externalities the socioeconomic performance of today s workers depends not only on parental skills but also on the average skills of the ethnic group in the parents generation or ethnic capital this paper investigates the link between the ethnic externality and ethnic neighborhoods the evidence indicates that residential segregation and the external effect of ethnicity are linked partly because ethnic capital summarizes the socioeconomic background of the neighborhood where the children were raised ethnicity has an external effect even among persons who grow up in the same neighborhood when children are exposed frequently to persons who share the same ethnic background copyright 1995 by american economic association

intergenerational mobility and sample selection in short panels using data from the first 11 waves of the bhps this paper measures the extent of the selection bias induced by standard coresidence conditions bias that is expected to be severe in short panels on measures of intergenerational mobility in occupational prestige we try to limit the impact of other selection biases such as those induced by labour market restrictions that are typically imposed in intergenerational mobility studies by using different measures of socio economic status that account for missing labour market information we stress four main results first there is evidence of an underestimation of the true intergenerational elasticity the extent of which ranges between 12 and 39 second the proposed methods used to correct for the selection bias seem to be unable to attenuate it except for the propensity score weighting procedure which performs well in most circumstances this result is confirmed both under the assumption of missing at random data as well as under the assumption of not missing at random data third the two previous sets of results direction and extent of the bias and differential abilities to correct for it are also robust when we account for measurement error fourth restricting the sample to a period shorter than the 11 waves under analysis leads to a severe sample selection bias in the cases when the analysis is limited to eight waves this bias ranges from about 40 to 65 copyright 2006 john wiley sons ltd

complementarity growth and trade we consider an endogenous growth model with international trade in complemen tary capital goods the model possesses several distinct balanced growth solutions which we classify using stability under adaptive learning some of the equilibria can involve growth rates much higher than others we show that in addition to a small usually positive effect on a given equilibrium an expansion in trade may sometimes yield a much larger sudden jump in growth the small effect on the initial equilibrium may reduce growth if the oppor tunity cost of capital rises very fast as growth accelerates jel classification f12 f1 5 041 complementarit croissance et commerce international les auteurs utilisent un modele de croissance endogene en presence de commerce international de biens capitaux complemen taires le modele possede plusieurs solutions de croissance equilibree distinctes que les auteurs classifient en utilisant des mesures de stabilite avec apprentissage adaptatif certains de ces equilibres peuvent impliquer des taux de croissance plus eleves que d autres ii appert qu une expansion du commerce international en plus d avoir un petit effet habituellement positif sur un equilibre donne peut parfois engendrer une augmentation plus forte et sou daine de la croissance le petit effet sur l equilibre initial peut reduire la croissance si le couit d opportunite du capital augmente rapidement a proportion que la croissance accelere

did inequality cause the u s financial crisis in his widely discussed book fault lines 2010 raghuram rajan argues that many low and middle income consumers have reduced their saving and increased debt since income inequality started to soar in the united states in the early 1980s this has temporarily kept private consumption and employment high but it also contributed to the creation of a credit bubble this surge in household indebtedness turned out to be unsustainable in the financial crisis starting in 2007 although rajan and others emphasize the role of government in promoting credit to those households with declining relative permanent incomes other strands of the literature have focused more explicitly on the implications of rising inequality for aggregate demand and households demand for credit these differences in emphasis may explain why the literature on the inequality crisis nexus appears somewhat disparate even though the various strands are far from mutually exclusive but rather complement each other we therefore place the rajan hypothesis in the context of competing theories of consumption and survey the empirical literature on the effects of inequality on household behaviour we conclude that the empirical evidence calls for a renaissance of the relative income hypothesis of consumption

social mobility what is it and why does it matter the definition of social mobility is a matter of debate in the following discussion conceptual issues in the literature on mobility are commented this paper defines social mobility as a situation in which the relative economic status of an agent is not dependent on starting conditions such as parental income or family background analyzing the determinants of mobility involves exploring the channels through which offspring s income is correlated to its parents such as inherited bequest education skills among many others this survey explores in an analytical framework the relation between social mobility and inequality among other important dimensions of income distribution that are jointly determined the focus is on the relevance of social mobility as it affects variables determining welfare and economic efficiency and therefore on policies to promote it

a quantized approach to rational inattention abstract in this paper i propose a model of rational inattention where the choice variable is a deterministic function of the exogenous variables and still only a finite amount of information is being used this holds provided the choice variable is discrete rather than continuous that is the mapping from the realization of the exogenous variables to the endogenous ones is piece wise constant thus limited information is now a source of lumpiness in behavior rather than a source of noise the approach is applied to a simple static model of price setting where individual price setters face aggregate monetary shocks and idiosyncratic productivity shocks the effect of aggregate money shocks on output and prices is studied it is shown that as the variance of idiosyncratic shocks become large the aggregate log price level converges to a linear function of the aggregate money shock with a coefficient which is strictly between 0 and 1 consequently unanticipated aggregate money shocks have real effects on output in contrast to the sticky price model of caplin and spulber 1987 but these effects are smaller than in standard rational inattention models or in the lucas 1972 misperception model

the trend and mechanism of intergenerational income mobility in china an analysis from the perspective of human capital social capital and wealth intergenerational income mobility is the extent to which children s incomedepends on their parents the increasing of intergenerational income mobilitycan relieve the social pressure caused by the income gap and provide the incentivefor hardworking and human capital investment using microdata and economicempirical technique this study analyses the time trend and structuralmechanism of china s intergenerational income mobility in 1988 2005 theresults suggest the intergenerational income mobility improves in the early period then becomes stable and even shows a deteriorating sign recently humancapital social capital and wealth explain more than 60 per cent of the intergenerationalincome mobility in china with wealth contributing the largest proportion promoting education equality eliminating the labour market segmentationand deepening the market oriented reform are suggested to help improve theintergenerational income mobility in china

galton versus the human capital approach to inheritance a century ago francis galton proposed a simple yet powerful model of inheritance gary backer s human capital model is often used to analyze important empirical and policy questions but does it dominate galton s from a positive point of view i derive nine implicatiions of the human capital approach that are distinct from galton s evidence from the pis scf and nlsy micro data sets as well as results reported in previous literatures suggest that four of the unique implications are refuted two implications are verified and mixed results are obtained for three others some extensions of economics recently developed by becker and others when applied to inheritance may improve economics predictions

accounting for intergenerational income persistence noncognitive skills ability and education we analyse in detail the factors that lead to intergenerational persistence among sons where this is measured as the association between childhood family income and later adult earnings we seek to account for the level of income persistence in the 1970 bcs cohort and also to explore the decline in mobility in the uk between the 1958 ncds cohort and the 1970 cohort the mediating factors considered are cognitive skills non cognitive traits educational attainment and labour market attachment changes in the relationships between these variables parental income and earnings are able to explain over 80 of the rise in intergenerational persistence across the cohorts

social mobility and the demand for redistribution the poum hypothesis this paper examines the often stated idea that the poor do not support high levels of redistribution because of the hope that they or their offspring may make it up the income ladder this prospect of upward mobility poum hypothesis is shown to be fully compatible with rational expectations and fundamentally linked to concavity in the mobility process a steady state majority could even be simultaneously poorer than average in terms of current income and richer than average in terms of expected future incomes a e rst empirical assessment suggests on the other hand that in recent u s data the poum effect is probably dominated by the demand for social insurance in the future everyone will be world famous for e fteen minutes andy warhol 1968

performing arts attendance an economic approach this paper examines to what extent art education prices and standard socio economic characteristics influence attendance at professional performing arts events theatre classical music opera ballet and dance it distinguishes the influence such variables have on whether a person participates or not from the effect that they have on the number of times a person decides to attend the introduction of art education and price variables is likely to reduce the omitted variable bias present in previous empirical studies and improve estimations art education is highly correlated with participation while it is not equally associated with frequency of attendance prices and geographical concentration are generally not correlated with participation however there are large differences among art forms and economic resources appear to be relevant in the case of classical music policy makers can use information on what results can be expected from policies aimed at reducing prices or increase art education in

blowing up money the earnings penalty of smoking in the 1970s and the 21st century abstract we analyze the earnings penalty of smoking among swedish twins in two social contexts the 1970s when smoking was common and widely accepted and when there were relatively few tobacco laws aiming to reduce smoking and the 2000s when smoking had become more expensive stigmatizing and less common and when tobacco laws and regulations had intensified the results show that the short term earnings penalty of smoking was much higher in the 21st century than in the 1970s for men for women smokers had on average higher annual earnings compared to nonsmokers in the 1970s but lower annual earnings in the 2000s in the long run there was an earnings gap for men between never smokers and continuous smokers whereas there was a pronounced earnings bonus of smoking cessation for women the results emphasize the importance of social context and the long term horizon when evaluating the consequences of smoking for earnings

political support and tax reforms with an application to italy in 2001 the italian government introduced a personal income tax reform to be implemented in successive phases in 2004 taxes were reduced to all income levels with higher gains for low income and high income individuals than for middle income ones a large debate arised this paper explores the political economy reasons under this tax reform mainly the attempt of the government to attract the uncertain voters swing voters a probabilistic voting model is introduced to capture the importance of swing voters the model predicts that the average personal income tax rate tends to be lower for groups of lower income higher preference for leisure and containing more politically mobile voters swing voters however data from italian polls show that while the tax reform was a good strategy to attract swing voters the specific design of the reform which favored high income and low income individuals but not the middle class was not the more appropriate strategy

europe vs america institutional hysteresis in a simple normative model we show how the differences in us and european institutions can arise in a normative model the paper focuses on the labor market and the government s decision to set unemployment benefits in response to an unemployment shock the government balances insurance considerations with the tax burden of benefits and the possibility that they introduce adverse incentive effects whereby benefits increase unemployment it is found that when an adverse shock occurs benefits should be increased most when the adverse incentive effects of benefits are largest adjustment costs of changing benefits introduce hysteresis and can help explain why post oil shock benefits remained high in europe but not in the us desirable features of the model are that we obtain an asymmetry out of a symmetric environment and that the mechanism yielding hysteresis is both simple requires the third derivative of the utility function to be non negative and self correcting empirical evidence concerning the role of corporatism is discussed

the discovery of opportunities extending the economic theory of the entrepreneur shane 2003 a general theory of entrepreneurship the individual opportunity nexus cheltenham edward elgar has shown convincingly that modern theories of entrepreneurship perform reasonably well in explaining the empirical results obtained in different areas of research upon the subject his book also shows that the cognitive aspects of entrepreneurship in general and opportunity recognition in particular are important areas that warrant further research this paper argues that the concept of opportunity is closely related to the concept of a project as an opportunity is essentially a project that would prove beneficial if it were exploited it is suggested that modelling individual search across potential projects and the screening of projects by the use of symptoms holds the key to the successful modelling of entrepreneurship in terms of opportunity

decomposing intergenerational income elasticity the gender differentiated contribution of capital transmission in rural philippines summary using longitudinal data from rural philippines we decompose intergenerational income elasticity ige into five distinct pathways intergenerational transmissions of health education land and spouse education capital plus residual correlation in productivity intergenerational human capital transmissions from mothers are stronger than those from fathers maternal education is the parental capital most strongly associated with ige while naive ige estimates are indistinguishable for sons and daughters the pathways that generate these results differ strikingly for sons ige is entirely explained by parent to child capital transmission by contrast strong income correlation exists between daughters and parents even after controlling for parent and child capital endowments

an alternative measure of intergenerational income mobility based on a random coefficient model summary we propose an alternative measure of the degree to which income status is transmitted from one generation to another our indicator of intergenerational income mobility is based on a random coefficient model which allows for variation in intergenerational mobility across families due to multiplicative unobserved family specific characteristics this alternative measure suggests that intergenerational income persistence is typically stronger than when intergenerational income mobility is measured using the standard elasticity of sons income with respect to fathers income copyright 2011 john wiley sons ltd

the origins of intergenerational associations lessons from swedish adoption data we use unique swedish data with information on adopted children s biological and adoptive parents to estimate intergenerational mobility associations in earnings and education we argue that the impact from biological parents captures broad prebirth factors including genes and prenatal environment and the impact from adoptive parents represents broad postbirth factors such as childhood environment we find that both pre and postbirth factors contribute to intergenerational earnings and education transmissions and that prebirth factors are more important for mother s education and less important for father s income we also find some evidence for a positive interaction effect between postbirth environment and prebirth factors

socially responsible investments among parents and adult children novel evidence is provided of a positive correlation between parents and their children s socially responsible mutual fund investment behavior although captured parent child correlations reflect

social mobility and redistributive politics just like economists voters have conflicting views about redistributive taxation because they estimate its incentive costs differently we model rational agents as trying to learn from their dynastic income mobility experience the relative importance of effort and predetermined factors in the generation of income inequality and therefore the magnitude of these incentive costs in the long run left wing dynasties believing less in individual effort and voting for more redistribution coexist with right wing dynasties this allows us to explain why individual mobility experience and not only current income matters for political attiitudes and how persistent differences in perceptions about social mobility can generate persistent differences in redistribution across countries

fortunate sons new estimates of intergenerational mobility in the united states using social security earnings data previous studies relying on short term averages of fathers earnings have estimated the intergenerational elasticity ige in earnings to be approximately 0 4 due to persistent transitory fluctuations these estimates have been biased down by approximately 30 or more using administrative data containing the earnings histories of parents and children the ige is estimated to be around 0 6 this suggests that the united states is substantially less mobile than previous research indicated estimates of intergenerational mobility are significantly lower for families with little or no wealth offering empirical support for theoretical models that predict differences due to borrowing constraints

does money matter for intergenerational income transmission the intergenerational income elasticity iie is a crucial measure of income mobility in this article we develop a structural model to examine the channels through which this elasticity operates using data from the panel study of income dynamics we separately identify the human capital and the financial components the human capital component examines the transmission of human capital independent of financial investments whereas the financial component examines the impact of income that is uncorrelated with human capital that is exogenous income using a two stage framework we show that the iie operates through both channels moreover our estimates show that the financial component may have a larger effect than previously estimated plausibly attributing to 36 of intergenerational income transmission indeed this result holds even when the financial component is defined in an incredibly narrow manner this suggests that cash payments could promote intergenerational mobility

reservation wages and unemployment insurance this paper argues that a risk averse worker s after tax reservation wage encodes all the relevant information about her welfare this insight leads to a novel test for the optimality of unemployment insurance based on the responsiveness of reservation wages to unemployment benefits some existing estimates imply significant gains to raising the current level of unemployment benefits in the united states but highlight the need for more research on the determinants of reservation wages our approach complements those based on baily s 1978 test

cooperation harassment and involuntary unemployment an insider outsider approach the authors present a theory of involuntary unemployment which explains why the unemployed workers outsiders are unable or unwilling to find jobs even though they are prepared to work for less than the prevailing wages of incumbent workers in siders the outsiders do not underbid the insiders since were the y to do so the insiders would withdraw cooperation from them making their work unpleasant with harassment and thereby reducing the prod uctivity and increasing the reservation wages of the underbidders th e resulting labor turnover costs create economic rent which the insid ers tap in wage setting and as a result involuntary unemployment ma y arise copyright 1988 by american economic association

another problem in the estimation of intergenerational income mobility abstract the current econometric model of intergenerational income mobility is premised on a simplified notion of permanent income analytical results and empirical evidence suggest that estimates are not robust to failure of this assumption

economic search an experimental study this paper presents results of experiments designed to test several of the hypotheses present in the theoretical literature on optimal economic search first we test whether the subjects searchers actually search for wages in ways that are consistent with setting an optimal reservation wage we then proceed to determine experimentally the effects of risk aversion increased search costs changes in risk brought about by a mean preserving transformation of the distribution of wage offers the presence or absence of recall the existence of a finite horizon and the searcher s state of knowledge about the underlying distribution of wages in general we find that the searchers exhibit behavior that is consistent with that predicted by theory differences between risk neutral and risk averse searchers are found and the responses of both groups to changes in search costs in the degree of risk or in the state of knowledge are consistent with theoretical predictions

labor market search an experimental study the theoretical results derived from models of economic search have implications which relate to the structure and performance of labor markets utilizing a series of laboratory experiments we attempt to capture many of the features of workers search and also the conditions under which labor markets operate by varying certain of the experimental conditions we are able to determine the searchers responses to changes in the terms of unemployment insurance to the existence of a minimum wage and to different states of information about the underlying distribution of wages in most cases the behavior of the searchers is consistent with that predicted by theory

healthy bodies and thick wallets the dual relation between health and economic status there is abundant evidence of a quantitatively large association between many measures of economic status including income and wealth and a variety of health outcomes such as mortality or morbidity however considerable and often heated debate remains especially across disciplines about the direction of causation and about why the association arises although medical scientists are often convinced that the dominant if not exclusive pathway is that variation in socioeconomic status produces health disparities they are increasingly debating among themselves about why low economic status might lead to poor health at least for modern industrial countries 1 the old standby arguments the less well to do have access to less or lower quality medical care or a stronger pattern of deleterious personal behaviors have been rejected as insufficient instead a series of intriguing competing theories have arisen that emphasize long term impacts of early childhood or even inter uterine environmental factors the cumulative effects of prolonged exposures to individual stressful events or reactions to macro societal factors such as rising levels of income inequality a common link is that each theory attempts to document the physiological processes through which low economic status leads to poorer health while these scientific questions are extremely important this research has taken place with little input from economists economists are now making contributions about the alternative pathway the impact poor health may have on economic resources poor health may restrict a family s capacity to earn income or to accumulate assets by limiting work or by raising medical expenses at a minimum this work should provide a caution against exaggerating the magnitude of causation from economic status to health outcomes but the potential contribution runs deeper as people age the evolving variation in individual health outcomes may offer additional statistical information to estimate parameters of household savings and consumption behavior that so far have proven to be somewhat elusive thus incorporating health uncertainty and risk into economic models should eventually enrich our understanding of basic tenets of household behavior the first section of this paper documents the size of the association between health and one prominent economic status measure household wealth section two deals with how health influences economic status by sketching out reasons why health may alter household savings and eventually wealth and then providing estimates of the empirical magnitude of these effects section three shifts attention to the alternative pathway the links between economic status and health and summarizes 2major controversies and evidence surrounding these issues

bequests taxation and the distribution of wealth in a general equilibrium model this paper examines the role of bequests and of taxation on bequests for the distribution of wealth we investigate a model with overlapping generations and heterogenous households where parents derive utility directly from their bequests we obtain all results analytically using the coefficient of variation as the measure of inequality bequests per se diminish the inequality of wealth since they raise private savings and hence average wealth holdings more than the variance of wealth from a policy perspective taxing bequests and redistributing government revenue lump sum among the young generation further decreases wealth inequality

incentive enhancing preferences personality behavior and earnings suppose there is a principal agent relationship between employer and employee in which effort is not contractible but is elicited through employer incentive mechanisms we term preferences that allow the employer to elicit effort at lower cost incentive enhancing we analyze how such preferences affect earnings nd then provide evidence that one of the relevant behavioral traits efficacy as well as other psychological aspects of individuals are significant influences on earnings we conclude that measures of cognitive performance are not sufficient indicators of the effectiveness of schools in promoting student labor market success incentive enhancing preferences are irreducibly heterogeneous incentive enhancing preferences help explain the persistence of poverty over generations within families and unlike cognitive skills incentive enhancing traits need not be welfare increasing for their bearers

efficient unemployment insurance this paper constructs a tractable general equilibrium model of search with risk aversion an increase in risk aversion reduces wages unemployment and investment unemployment insurance has the opposite effect insured workers seek high wage jobs with high unemployment risk an economy with risk neutral workers achieves maximal output without any unemployment insurance but an economy with risk averse workers requires a positive level of unemployment insurance to maximize output therefore moderate unemployment insurance not only improves risk sharing but also increases output

changing roles of ability and education in u s intergenerational mobility using data on young adults from the 1979 and 1997 national longitudinal survey of youth we investigate the changing roles of ability and education in the transmission of economic status across generations we find that ability plays a substantially diminished role for the most recent cohort whereas education plays a much larger role the first finding results primarily from a smaller effect of children s ability on status the second from an increased correlation between parental status and educational attainment a replication of the analysis by gender reveals that the changes in the role of ability are largely driven by men whereas the changes in education s role are largely driven by women jel j62 i24

energy conservation nudges and environmentalist ideology evidence from a randomized residential electricity field experiment nudges are being widely promoted to encourage energy conservation we show that while the electricity conservation nudge of providing feedback to households on own and peers home electricity usage works with liberals it can backfire with conservatives our regression estimates predict that a democratic household that pays for electricity from renewable sources that donates to environmental groups and that lives in a liberal neighborhood reduces its consumption by 3 percent in response to this nudge a republican household that does not pay for electricity from renewable sources and that does not donate to environmental groups increases its consumption by 1 percent