Explaining Intergenerational Mobility: The Role of Fertility and Family Transfers

Abstract

Poor families have more children and transfer less resources to them. This suggests that family decisions about fertility and transfers dampen intergenerational mobility. To evaluate the quantitative importance of this mechanism, we extend the standard heterogeneousagent life cycle model with earnings risk and credit constraints to allow for endogenous fertility, family transfers, and education. The model, estimated to the US in the 2000s, implies that a counterfactual flat income-fertility profile would-through the equalization of initial conditions-increase intergenerational mobility by 6%. The impact of a counterfactual constant transfer per child is twice as large.

The intergenerational elasticity of earnings: exploring the mechanisms

“…This observation is also supported by Angrist et al (2010), who show that the effects of family size on earnings are in the range -2% to +2% when using twins and/or sex composition as instruments, and are -3% when using OLS 17 . However, Daruich and Kozlowski (2020) find that an equalisation of fertility across the income gradient would increase income persistence by 6% -an estimate very close to ours. Column (1) presents OLS estimates from a regression of children's lifetime earnings on school quality at all ages.…”

“…For exampleGayle et al (2015),Lee and Seshadri (2019),Caucutt and Lochner (2020) andDaruich and Kozlowski (2020).…”

The Economics of Fertility: A New Era

“…At the same time, the portion of women who have two children has also risen everywhere. Given that the discreteness of fertility matters more when most families choose zero to three children rather than having large families, an increasing number of recent papers model fertility decisions as a discrete and sequential choice over a limited number of fertility options (e.g., Doepke and Kindermann 2019, Daruich and Kozlowski 2020, Kim, Tertilt, and Yum 2021. This approach is particularly important when endeavoring to understand the timing of births in life cycle models (e.g., Hotz and Miller 1988, Caucutt, Guner, and Knowles 2002, Sommer 2016, Guner, Kaya, and Sanchez Marcos 2020.…”

“…Fertility decisions also matter for the transmission of inequality across generations, an issue that has been highlighted by de la Croix and Doepke (2003), Vogl (2016), Cordoba, Liu, and Ripoll (2016), and Daruich and Kozlowski (2020), among others. Children born to groups with a high fertility rate are overrepresented in the next generation, and if high fertility goes hand in hand with low investments in children, persistent poverty can result (Moav 2005).…”

Universal Basic Income: A Dynamic Assessment

“…Among federal loans, the Sta ord loan program was the most common: 96% of undergraduates who borrowed took out Sta ord loans. As there are various types of Sta ord loans, we use the weighted average interest rate to set = 0.009 (see Daruich and Kozlowski, 2020). e borrowing limit in college is set to match the cumulative borrowing limit on Sta ord loans ($23,000).…”