Working Paper: NBER ID: w15946
Authors: Andrea Ichino; Loukas Karabarbounis; Enrico Moretti
Abstract: The intergenerational elasticity of income is generally considered one of the best summary measures of the degree to which a society gives equal opportunity of success to all its members, irrespective of their family background. We present a parsimonious political economy model and show how the interaction between private and collective decisions determines the equilibrium level of mobility. Contrary to what it is generally assumed, a low correlation between father income and son income is not always desirable, as it may imply more inefficiency due to the distortionary effects of mobility-enhancing public policies. Moreover, taking into account the heterogeneity in preferences for intergenerational mobility leads to the conclusion that even if a fully mobile society is desirable ex ante, it may not be politically sustainable ex post. Our model clarifies the structural parameters behind the widely studied intergenerational elasticity of income in terms of political economy forces. Finally, we show some empirical evidence on the relationship between intergenerational elasticity of income across countries and its underlying determinants that is consistent with the predictions of the model.
Keywords: No keywords provided
JEL Codes: J01
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| political economy forces (P19) | intergenerational elasticity of income (D15) |
| more progressive educational policy (I28) | social mobility (J62) |
| more progressive educational policy (I28) | long-term income for families with higher abilities (I24) |
| political process (D72) | degree of social mobility (J62) |
| politically active rich dynasties (D72) | social spending on education (H52) |
| social spending on education (H52) | income mobility (J62) |
| political preferences (D72) | intergenerational mobility (J62) |
| identity of politically decisive family (J12) | intergenerational mobility (J62) |