The Political Economy of Intergenerational Income Mobility
47 Pages Posted: 1 Mar 2010
There are 3 versions of this paper
The Political Economy of Intergenerational Income Mobility
The Political Economy of Intergenerational Income Mobility
Date Written: February 2010
Abstract
The intergenerational elasticity of income is considered one of the best measures of the degree to which a society gives equal opportunity to its members. While much research has been devoted to measuring this reduced-form parameter, less is known about its underlying structural determinants. Using a model with exogenous talent endowments, endogenous parental investment in children and endogenous redistributive institutions, we identify the structural parameters that govern the intergenerational elasticity of income. The model clarifies how the interaction between private and collective decisions determines the equilibrium level of social mobility. Two societies with similar economic and biological fundamentals may have vastly different degrees of intergenerational mobility depending on their political institutions. We offer empirical evidence in line with the predictions of the model. We conclude that international comparisons of intergenerational elasticity of income are not particularly informative about fairness without taking into account differences in politico-economic institutions.
Keywords: Intergenerational Mobility, Political Institutions, Public Education
JEL Classification: E24, J62, J68, P16
Suggested Citation: Suggested Citation
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