The intergenerational mobility literature has consistently found that the distribution of adult economic outcomes differ markedly depending on parental economic status, yet much remains to be understood about the drivers or determinants of this relationship. Existing literature on potential drivers focuses primarily on mean effects. To help provide a more complete picture of the potential forces driving economic persistence, we propose a method to decompose transition matrices and related indices. Specifically, we decompose differences between an estimated transition matrix and a benchmark transition matrix into portions attributable to differences in characteristics between individuals from different households (a composition effect) and portions attributable to differing returns to these characteristics between individuals from different households (a structure effect). We also incorporate a detailed decomposition, based on copula theory, that decomposes the composition effect into portions attributable to specific covariates and their interactions. We illustrate our method using data on white men from the 1979 National Longitudinal Survey of Youth. Estimation is based on an extended Mincer equation that includes cognitive and non-cognitive measures. To address the potential endogeneity of education, we implement an IV strategy that allows us to estimate causal effects and investigate the role of unobserved ability.JEL Classification: C14, C20, J31, J62
Using data on young adults from the 1979 and 1997 National Longitudinal Survey of Youth, we investigate the changing roles of ability and education in the transmission of economic status across generations. We find that ability plays a substantially diminished role for the most recent cohort whereas education plays a much larger role. The first finding results primarily from a smaller effect of children's ability on status, the second from an increased correlation between parental status and educational attainment. A replication of the analysis by gender reveals that the changes in the role of ability are largely driven by men whereas the changes in education's role are largely driven by women. (JEL J62, I24)
This study uses a quantile regression analysis to investigate intergenerational economic mobility in Korea. The analysis is based on data from the 1st through 11th waves of the Korean Labor and Income Panel Study (KLIPS) conducted from 1998-2008. The household nature of the data allows us to link parents' incomes to children's incomes at different points in time. Using a quantile regression analysis instead of mean one reveals that the effect of fathers' earnings are different across the conditional distribution of sons' earnings, particularly being larger on the upper quantile than on the lower quantile. After controlling effect of sons' college education by including a dummy variable for the degree, however, the pattern among quantile effects for fathers' earnings is no longer clear. Instead a new pattern emerges that education has a much larger effect on the upper quantiles than on the lower ones. Using nonparametric estimates of conditional density curves based on the quantile regression results, we derive some interesting features in graphical forms, which are not obvious in numerical analysis.
This paper uses unconditional quantile regressions to decompose changes in the black-white wage gap for young men between 1990 and 2011. Introducing a new application of reweighting methods, we control for selection into employment which tends to widen the gap. We find no changes in the gap itself between 1990 and 2011, but reversals in the roles of ability and education across the distribution. Ability loses importance at the bottom and middle but gains importance at the top, while the opposite occurs for education. This results from heterogeneous changes in returns to ability and education across the distribution alongside a widening educational achievement gap.
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