Arnold Kling

Economic Mobility

Arnold Kling, Great Questions of Economics
Previous Entry Next Entry

Alan B. Krueger summarizes various studies of economic mobility. Among the findings,

New studies by Bhashkar Mazumder of the Federal Reserve Bank of Chicago suggest that the similarity in income is even greater. Using Social Security records, he averaged fathers' earnings over 16 years (1970 through 1985) and sons' earnings over four years (1995 through 1998), and found that around 65 percent of the earnings advantage of fathers was transmitted to sons.

Krueger points out that if the correlation between fathers and sons is only .15 (as one early study found), then at two generations apart income is nearly uncorrelated. However, if the correlation is as high as .65, then it takes five generations for the influence of the first generation's income to dissipate.

I think that it is somewhat brave to take a correlation estimated in this way and extrapolate it across several generations. I have no way of knowing my great-great-great grandfather's income. As for my grandfather, he went bankrupt during the Depression. But I am confident that my income is highly dependent on the fact that he fled the Cossacks during the Russian Revolution to come to America.

Discussion Question. Studies that look at a single generation tend to show more economic mobility over a lifetime than do these cross-generational studies. One factor that may account for this is that cross-generational studies are limited to long-term U.S. citizens, whose income mobility tends to be less than that of immigrants. What other factors may account for the differences in apparent results between the two approaches?

Return to top