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Paper No' CEPDP1242: | Full paper
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Keywords: Intergenerational income mobility, social class fluidity, income inequality
JEL Classification: J13; J31; Z13
Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: CEP Discussion Papers
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Abstract:Family income is found to be more closely related to sons’ earnings for a cohort born in 1970 compared to one born in 1958. This result is in stark contrast to the finding on the basis of social class; intergenerational mobility for this outcome is found to be unchanged. Our aim here is to explore the reason for this divergence. We derive a formal framework which relates mobility in measured family income/earnings to mobility in social class. Building on this framework we then test a number of alternative hypotheses to explain the difference between the trends, finding evidence of an increase in the intergenerational persistence of the permanent component of income that is unrelated to social class. We reject the hypothesis that the observed decline in income mobility is a consequence of the poor measurement of permanent family income in the 1958 cohort.
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