Is the United States Still a Land of Opportunity? Recent Trends in Intergenerational Mobility

Abstract

We present new evidence on trends in intergenerational mobility in the United States using administrative earnings records. We find that percentile rank-based measures of intergenerational mobility have remained extremely stable for the 1971-1993 birth cohorts. For children born between 1971 and 1986, we measure intergenerational mobility based on the correlation between parent and child income percentile ranks. For more recent cohorts, we measure mobility as the correlation between a child's probability of attending college and her parents' income rank. We also calculate transition probabilities, such as a child's chances of reaching the top quintile of the income distribution starting from the bottom quintile. Based on all of these measures, we find that children entering the labor market today have the same chances of moving up in the income distribution (relative to their parents) as children born in the 1970s. However, because inequality has risen, the consequences of the “birth lottery” - the parents to whom a child is born - are larger today than in the past.

Inequality and Mobility: Gatsby in the Americas

“…Imperfect credit markets make it difficult low-income parents to invest in their children's education so inequality and lack of mobility persist. Aiyagari et al [13] suggest the problem goes beyond market failure because parents tend to invest in all their children not just those with the best test scores, why Gary Solon's [14] retooling of Becker and Tomes [38] highlights the role of progressive education spending, a factor we find is key in Latin America (but see Becker et al [15] who argue that progressive government education programs may actually reduce mobility, a proposition we test indirectly in a longer version of this paper) 2 . As Andersen [16] points out another advantage of using educational attainment across generations is that it manifests itself sooner.…”

“…Since many teens live with their parents, intra-household data can be used to predict intergenerational mobility. To track children's income over time one needs longitudinal income data or linked income tax returns as Chetty et al, [2] use. Hilger [10] uses U.S. census data to compare both intergenerational income (IM) and intergenerational education measures.…”

“…De Janvry et al [24] find these programs had direct effects on poverty and school attendance especially during crises, but they also signaled a shift in social priorities which Aiyagari et al [13] suggest is important for guiding parent's investment in children even if credit markets were complete (which they are not in Latin America). 2 In a 2015 working paper presented by his coauthors at a conference honoring Gary Becker posthumously, Becker et al 2015 [15] argue that "government interventions intended to ameliorate inequality may in fact lower intergenerational mobility, even when they do not directly favor the rich. Government programs that are complementary to parental inputs crowd-in (rather than crowd-out) out investments by parents.…”

“…This second finding is important because while Corak, 2013 and others find the GGC correlation holds across OECD countries, and the evidence over time is decidedly mixed. In particular, Chetty et al, [2] and Hilger [3] use two different measures of social mobility and both find no trend in US intergenerational mobility from 1980 to 2010 despite a sharp increase in inequality. As Torche [4] argues in her recent comprehensive survey of social mobility in Latin America, these findings create a "conundrum and a challenge" for the Gatsby Curve hypothesis.…”

Youth Idleness in Indonesia

“…But for the rich households, the greater probability of youth idleness is due to household supports. A greater intra-household distribution of assets may let them stay at idle position, or even unproductive (see also Chetty et al, 2014). There is unclear effect of 'qualitative' response of health on the probability of youth becoming unemployed.…”