Working Paper: NBER ID: w8948
Authors: Nathan D. Grawe; Casey B. Mulligan
Abstract: Economic theory offers interpretations of intergenerational correlations that are different from the theories of other disciplines, and have important policy implications. Our paper presents a subset of those theories, and shows how they are consistent with observed mobility patterns as they vary across countries, demographic groups, and economic status measure. The data may suggest that the economic approach overemphasizes credit constraints, although more work is needed to further develop some of the alternative economic models. We also show how, in the models, 'progressive' policy may reduce mobility depending on how the policy is administered and how mobility is measured.
Keywords: Intergenerational Correlations; Mobility; Credit Constraints
JEL Codes: J62; D10; I22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Parental financial resources (I22) | Human capital investment decisions (J24) |
| Human capital investment decisions (J24) | Intergenerational correlations in earnings (J31) |
| Ability transmission (I24) | Intergenerational earnings mobility (J62) |
| Credit constraints (E51) | Educational choices (I21) |
| Educational choices (I21) | Level of human capital acquired by children (J24) |
| Level of human capital acquired by children (J24) | Earnings potential (J31) |
| Parental altruism (D64) | Consumption mobility (D16) |
| Aggregate economic shocks (E19) | Empirical estimates of mobility (J62) |
| Credit constraints (E51) | Mobility outcomes (J62) |