The Political Economy of Intergenerational Income Mobility

47 Pages Posted: 1 Mar 2010

See all articles by Andrea Ichino

Andrea Ichino

University of Bologna

Loukas Karabarbounis

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Enrico Moretti

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Multiple version iconThere are 3 versions of this paper

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

Ichino, Andrea and Karabarbounis, Loukas and Moretti, Enrico, The Political Economy of Intergenerational Income Mobility (February 2010). CEPR Discussion Paper No. DP7710, Available at SSRN: https://ssrn.com/abstract=1559666

Andrea Ichino (Contact Author)

University of Bologna ( email )

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Loukas Karabarbounis

University of Chicago - Booth School of Business ( email )

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United States

National Bureau of Economic Research (NBER) ( email )

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Enrico Moretti

University of California, Berkeley - Department of Economics ( email )

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Berkeley, CA 94720-3880
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HOME PAGE: http://emlab.berkeley.edu/~moretti/

National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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