Working Paper: NBER ID: w7678
Authors: Song Han; Casey B. Mulligan
Abstract: Some of the important implications of the parental investment model of intergenerational mobility have been derived under the assumption that parental income is the main source of heterogeneity. We explicitly model the variability and inheritability of innate' earnings ability and the variability of tastes, showing how they affect observed degrees of intergenerational consumption and earnings mobility. Heterogeneity increases the difficulty of detecting the existence of borrowing constrained families. Conversely, the presence of heterogeneity means that economic and linear statistical models of inheritance generate similar intergenerational data on consumption and earnings. In this sense, our findings offer some support for Goldberger's (1989) criticism of human capital models of inheritance. Finally, we suggest that any cross-country differences in intergenerational earnings mobility are more readily interpreted according to the heterogeneity of inherited ability, rather than optimal family responses to country-specific institutions for accumulating human capital.
Keywords: No keywords provided
JEL Codes: J62; J24; E21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| parental income (D31) | estimates of intergenerational mobility (J62) |
| ability heterogeneity (D29) | estimates of intergenerational mobility (J62) |
| borrowing constraints (F34) | investment in human capital (J24) |
| investment in human capital (J24) | intergenerational mobility (J62) |
| inherited ability heterogeneity (D29) | cross-country differences in intergenerational earnings mobility (J62) |