Working Paper: NBER ID: w29761
Authors: Steven N. Durlauf; Andros Kourtellos; Chih Ming Tan
Abstract: This paper provides a synthesis of theoretical and empirical work on the Great Gatsby Curve, the positive empirical relationship between cross-section income inequality and persistence of income across generations. We present statistical models of income dynamics that mechanically give rise to the relationship between inequality and mobility. Five distinct classes of theories, including models on family investments, skills, social influences, political economy, and aspirations are developed, each providing a behavioral mechanism to explain the relationship. Finally, we review empirical studies that provide evidence of the curve for a range of contexts and socioeconomic outcomes as well as explore evidence on mechanisms.
Keywords: income inequality; intergenerational mobility; Great Gatsby Curve; socioeconomic outcomes
JEL Codes: D3; H0; J0; R0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher income inequality (D31) | lower intergenerational mobility (J62) |
| higher income inequality (D31) | increases in the variance of offspring income (J19) |
| increases in the variance of offspring income (J19) | reinforces the persistence of income across generations (D15) |
| income inequality (D31) | variations in IGE (D50) |
| family investments (D14) | intergenerational mobility (J62) |
| social influences (C92) | intergenerational mobility (J62) |
| structural inequalities (I14) | limit opportunities for upward mobility (J62) |