Working Paper: CEPR ID: DP15166
Authors: Giovanni Gallipoli; Hamish Low; Aruni Mitra
Abstract: We characterize the joint evolution of cross-sectional inequality in income and consumption across generations. We estimate a model of intergenerational persistence and separately identify influences of parental heterogeneity and idiosyncratic factors. We find evidence of family persistence in earnings and consumption, and of marital sorting. Idiosyncratic heterogeneity, however, accounts for most of cross-sectional inequality. Within-family insurance represents a modest part of overall consumption insurance and is largest for the richest quartile. Insurance among the poorest comes from outside the family. Our findings suggest intergenerational persistence would have to be much higher to induce, by itself, substantial increases in inequality.
Keywords: income; consumption; intergenerational persistence; inequality
JEL Codes: D15; D64; E21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Parental influences (J12) | Children's economic outcomes (J13) |
| Idiosyncratic heterogeneity (D29) | Cross-sectional inequality (I24) |
| Parental heterogeneity (J12) | Earnings inequality (D31) |
| Parental heterogeneity (J12) | Consumption inequality (D31) |
| Idiosyncratic factors (D91) | Inequality (D63) |
| Persistence in earnings (C41) | Passthrough in consumption expenditures (D19) |
| Educational attainment (I21) | Intergenerational outcomes (D15) |
| Parental income (D31) | Family insurance effectiveness (G52) |