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Lecture 5: Economic and Social Inequality and Intergenerational Mobility -…
Lecture 5: Economic and Social Inequality and Intergenerational Mobility
Intergenerational mobility: Measures how strongly economic or economic outcomes are related between parents and children.
High mobility: Family background matters less - children can move up and down the social ladder
Low mobilty: Family background matters a lot - advantages (or disadvantages) persist across generational
Mobility reflects degree of equality and oppurtunity in a society.
Measuring Intergenerational mobility: Economist focus on income and wealth. Sociologists focus on education and occupations.
Intergenerational Elasticity (IGE) Equation:
y=income
i=family index
The higher IGE=>more persistence
Eks: if IGE = 0,5=> percentage difference in earnings between children from from fam A and B will be 50% of difference in parental earnings.
US - The "Land of opportunity" - Empirical data Chetty 2014 contradicts this.
Relative mobility: Slope of parent - child income rang regression (IGE)
Absolute mobility: Expected income rank of a child whose parents were at the 25th percentile of income distribution ($30 000)
Key findings of Chetty:
Large geographical variation across the US.
Stable relative mobility over time, but declining absolute mobility
IGE is not causal, since parental income correlates with:
genes
health
education
social network.
Researchers need exogenous variation in:
parental income
parental income
Why family background matters?
Parents influence children through both genes and enviroment.
Earnings = f(skills, job match, preferences)
Prod skills=g(ability to acquire skills (genes) and schooling (familiy enviroment)
Becker-Tomes model (1979):
Parents invest in childrens human capital to improve earnings
Investments depend on: Childs innate ability, parental resources and preferances
If ability (genes) are inherited, we see high-achieving parents get high-achieving children and vice versa.
Poor people are credit constrained, cannot invest optimally in their children.
Genes vs enviroment
Sibling correlations: Familiy background account for roughly 20-40% of variation in outcomes.
Twin studies:
where yi(j) = outcome of family j, A=genes, C=family enviroment, E=idiosyncratic enviromental influences
50% heritabilty is close to what empirical studies using twins find.
GWAS - DNA variation to predict traits. currently only explain 20% of variation "missing heritability"
Would schools explain more or less of outcomes in a country where all schools are equally good? => Less - because equal enviroment reveal more innate differences.
