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Accounting for Intergenerational Earnings Persistence: Can We Distinguish Between Education, Skills, and Health?
Stockholm University, Faculty of Social Sciences, The Swedish Institute for Social Research (SOFI).
(English)Manuscript (preprint) (Other academic)
Abstract [en]

This paper illustrates the difficulty in disentangling the underlying channels of intergenerational earnings persistence by means of path analysis and recursive models. On closer examination, these models manifest their shortcomings as regards accounting for how parental earnings have a direct impact on their offspring's earnings, but also have an effect through other factors such as education, skills and health. The estimated effects of these mediating factors are likely to capture the influence of other mechanisms not taken into account in the analysis. Nonetheless, the results suggest that education is the most important mechanism in the earnings transmission process, although it is sensitive to the inclusion of other covariates and the order in which these are entered into the equation. Nonlinear specifications suggest that the effect of a father's earnings on his son's has the greatest impact primarily through education and IQ in the upper middle categories of the earnings distribution of the fathers, while health status is of secondary importance.

 

Keyword [en]
Cognitive and non-cognitive skills, Spline regression, Path analysis, Education
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:su:diva-37279OAI: oai:DiVA.org:su-37279DiVA: diva2:298317
Available from: 2010-02-08 Created: 2010-02-08 Last updated: 2010-02-25Bibliographically approved
In thesis
1. Essays in Empirical Labour Economics: Family Background, Gender and Earnings
Open this publication in new window or tab >>Essays in Empirical Labour Economics: Family Background, Gender and Earnings
2010 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

All three essays in this thesis are concerned with the interrelation of family, gender and labour market outcomes.

The first paper investigates family earnings mobility between parents and sons, and parents and daughters, highlighting the role of assortative mating. The results suggest that daughters are more mobile than sons. I also find that Sweden has a higher degree of mobility compared to the U.S., and that assortative mating is an important underlying channel for earnings transmission. The difference in mobility between the two countries does not inherently depend on factors affecting the marriage match. Moreover, adult economic outcomes are more dependent on family background for those at the lower end of the earnings distribution.

The second study analyses the long-run effects of an increase in family size on the 1980-2005 labour market outcomes of Swedish men and women. The decision to have (more) children is dependent on current and future labour market prospects. I use the exogenous variations in the sex composition of the first two children to overcome this endogeneity problem. My findings suggest that having an additional child has a stronger negative impact on earnings than on participation. However, mothers experience a substantial but not complete long-term recovery in earnings.

The third paper illustrates the difficulty in disentangling the underlying channels of intergenerational earnings persistence using a path analysis model. On closer examination, such a model has a potential shortcoming since the covariates are correlated to other unobserved factors. The results suggest that education is the most influential mechanism in the earnings transmission process, while IQ, mental ability and BMI are of secondary importance. However, education is sensitive to the inclusion of other covariates and the order in which these are entered into the equation.

Place, publisher, year, edition, pages
Stockholm: Department of Economics, Stockholm University, 2010. 22 p.
Series
Swedish Institute for Social Research, ISSN 0283-8222 ; 79
Keyword
Intergenerational mobility, Assortative mating, Nonlinearity, Female labour force participation, Sex-mix composition, Cognitive and non-cognitive abilities, Education
National Category
Economics
Research subject
Economics
Identifiers
urn:nbn:se:su:diva-37073 (URN)978-91-7447-015-4 (ISBN)
Public defence
2010-03-19, hörsal 9, hus D, Universitetsvägen 10 D, Stockholm, 10:00 (English)
Opponent
Supervisors
Note
At the time of the doctoral defense, the following papers were unpublished and had a status as follows: Paper 2: Manuscript. Paper 3: Manuscript.Available from: 2010-02-25 Created: 2010-02-08 Last updated: 2012-02-16Bibliographically approved

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