For the purpose of understanding the underlying mechanisms behind intergenerational associations in income and education, recent studies have explored the intergenerational transmission of abilities. We use a large representative sample of Swedish men to examine both intergenerational and sibling correlations in IQ. Since siblings share both parental factors and neighbourhood influences, the sibling correlation is a broader measure of the importance of family background than the intergenerational correlation. We use IQ data from the Swedish military enlistment tests. The correlation in IQ between fathers (born 1951-1956) and sons (born 1966-1980) is estimated to 0.347. The corresponding estimate for brothers (born 1951-1968) is 0.473, suggesting that family background explains approximately 50% of a person's IQ. Estimating sibling correlations in IQ, we thus find that family background has a substantially larger impact on IQ than has been indicated by previous studies examining only intergenerational correlations in IQ.
Social rörlighet – eller rörlighet mellan generationer – är av stort intresse iden allmänna debatten och inom forskningen. Sociologer har länge studeratklassrörlighet mellan föräldrar ochbarn. Under de senaste decennierna harnationalekonomer bidragit till sådanforskning och särskilt med analyser avinkomströrlighet mellan generationer. Både sociologer och nationalekonomer har också studerat rörlighet i olikadimensioner av utbildning. Det finns därför en omfattande forskning om social eller intergenerationell rörlighet, som bör spridas till en bred publik. Två färska svenska exempel på rapporter somgår igenom forskning på området och vänder sig till en bredare publik är en bilaga till 2019 års Långtidsutredning, med titeln ”Utvecklingen av intergenerationell rörlighet i Sverige” (Brandénoch Nybom 2019) och en SNS-rapportmed titeln ”Social rörlighet” (Adermonm fl 2021a). Denna kommentar är motiverad av dessa rapporter.
I nummer 5 av årets Ekonomisk Debatt (Björklund m fl 2022) utgick vi fråntvå färska rapporter som för en bredare svensk publik presenterade ny forskning om social eller intergenerationell rörlighet. Vi tog tillfället i akt att diskutera hur vi ser på denna forskning och hur vi tycker forskningen bör utvecklas.Vårt inlägg vände sig både till aktiva forskare på området (inom olika discipliner) och till en bredare publik som intresserar sig för jämlikhetsfrågor.
This paper uses Swedish register data to examine four classical outcomes in empirical labor economics: IQ noncognitive skills, years of schooling and long-run earnings. We estimate sibling correlations - and the variance components that define the sibling correlation - in these outcomes. We also estimate correlations for MZ-twins, who share all genes. We also extend the variance-component decomposition by accounting for birth order. We find that conventional intergenerational approaches severely underestimate the role of family background, and that future research should follow a more multidimensional approach to the study of family background.
Artikeln granskar fyra ansatser att studera familjebakgrundens betydelse för de ekonomiska utfallen inkomst och utbildningsår. Föräldrars och barns inkomster och utbildning samvarierar positivt, men sambanden förklarar bara en liten del av variationen i ekonomiska utfall och är i liten utsträckning kausala. Den starka kopplingen mellan syskons utfall ger däremot skäl att tro att familjebakgrunden, i vidare mening, förklarar en stor del av variationen i ekonomiska utfall och att många viktiga bakgrundsfaktorer saknar koppling till föräldrars inkomster och utbildning. Ansatsen att studera jämlikhet i möjligheter kan fånga upp sådana faktorer, men har hittills inte uppnått förklaringsgrader som närmar sig syskonkorrelationerna.
This paper presents and discusses four different approaches to the study of how individuals’ income and education during adulthood are related to their family background. The most well-known approach, intergenerational mobility, describes how parents’ and offspring’s income or education are related to each other. The intergenerational-effect literature addresses the question how an intervention that changes parental income or education causally affects their children’s outcome. The sibling-correlation approach estimates the share of total inequality that is attributed to factors shared by siblings. This share is generally substantially higher than what is revealed by intergenerational mobility estimates. Finally, the equality-of-opportunity approach is looking for a set of factors, in the family background and otherwise, that are important for children’s outcomes and that children cannot be held accountable for. We argue that all four approaches are most informative and that recent research has provided insightful results. However, by comparing results from the different approaches, it is possible to paint a more nuanced picture of the role of family background. Thus, we recommend that scholars working in the four subfields pay more attention to each other’s research.
This paper presents and discusses four different approaches to the study of how individuals’ income and education during adulthood are related to their family background. The most well-known approach, intergenerational mobility, describes how parents’ and offspring’s income or education are related to each other. The intergenerational-effect literature addresses the question how an intervention that changes parental income or education causally affects their children’s outcome. The sibling-correlation approach estimates the share of total inequality that is attributed to factors shared by siblings. This share is generally substantially higher than what is revealed by intergenerational mobility estimates. Finally, the equality-of-opportunity approach is looking for a set of factors, in the family background and otherwise, that are important for children’s outcomes and that children cannot be held accountable for.
We argue that all four approaches are most informative and that recent research has provided insightful results. However, by comparing results from the different approaches, it is possible to paint a more nuanced picture of the role of family background. Thus, we recommend that scholars working in the four subfields pay more attention to each other’s research.
We explore whether differences in intergenerational income mobility between the UK and Sweden show up early in life, finding stronger associations between parental income and birthweight, height and school performance in the UK. We investigate whether these differentials can account for the country difference in income mobility. While differences in the associations in birthweight and height are too weak to matter, school performance does account for a substantial part of this difference. However, country differences in the earnings returns to these skills are at least as important as the differences in the link between parental income and skills.
Equality of opportunity is an ethical goal with almost universal appeal. The interpretation taken here is that a society has achieved equality of opportunity if it is the case that what individuals accomplish, with respect to some desirable objective, is determined wholly by their choices and personal effort, rather than by circumstances beyond their control. We use data for Swedish men born between 1955 and 1967 for whom we measure the distribution of long-run income, as well as several important background circumstances, such as parental education and income, family structure and own IQ before adulthood. We address the question: in Sweden, given its present constellation of social policies and institutions, to what extent is existing income inequality due to circumstances, as opposed to 'effort'? Our results suggest that several circumstances, importantly both parental income and own IQ, are important for long-run income inequality, but that variations in individual effort account for the most part of that inequality.
This paper documents the variation in living standards of the poorest fifth of children in rich (and some middle-income) nations, with a focus on the relative importance and interaction of social transfers (net of taxes) and labour market incomes. Overall, the cross-national variation in the disposable income of disadvantaged children is comprised equally of variation in market and transfer income (with the two negatively correlated). The English-speaking countries stand out as all having relatively low market incomes, but substantial variation in transfer income. Their low market incomes reflect low employment hours in Australia and primarily low hours in the UK and Ireland, while in the US and Canada low hours and low pay contribute equally. Comparing incomes prior to and after the 2008 financial crisis, the real disposable incomes of the poorest fifth decreased substantially in Greece, Spain and Ireland, but were relatively stable in other rich nations.
The relationship between an individual's economic well-being and satisfaction with own life has been the focus of many studies both within and across countries, in one period of time and over time. As a proxy of economic well-being household income both adjusted and unadjusted for household needs has been generally used. The aim of the present paper is to propose a more comprehensive measure of well-being considering the role that wealth and permanent income play in simultaneously determining satisfaction with life. The results, based on representative microdata from the German Socio-Economic Panel Study (SOEP), suggest that both income and wealth increase satisfaction, that long-run income is more appropriate than short-term income and that satisfaction with life is particularly high for those who are at the top of both the income and wealth distributions.
We examine the complex relationship between money and happiness. We find that both permanent income and wealth are better predictors of life satisfaction than current income and wealth. They matter not only in absolute terms but also in comparative terms. However, their relative impacts differ. The first exerts a comparison effect-the higher the permanent income of the reference group, the lower life satisfaction-the second exerts an information effect-the higher the permanent wealth of the reference group, the higher life satisfaction. We also show that negative transitory shocks to income reduce life satisfaction while transitory shocks to wealth have no effect. Lastly, we analyse the effects of their components and find that not all of them predict life satisfaction: permanent taxes do not matter, while only the value of permanent real estate, financial and business assets do. Finally, we use quantile regression and analyse to what extent our results vary along the well-being distribution, finding the impacts to be larger at lower levels of life satisfaction.
Does economic inequality in one generation lead to inequality of opportunity in the next? In From Parents to Children, an esteemed international group of scholars investigates this question using data from ten countries with differing levels of inequality. The book compares whether and how parents' resources transmit advantage to their children at different stages of development and sheds light on the structural differences among countries that may influence intergenerational mobility.
How and why is economic mobility higher in some countries than in others? The contributors find that inequality in mobility-relevant skills emerges early in childhood in all of the countries studied. Bruce Bradbury and his coauthors focus on learning readiness among young children and show that as early as age five, large disparities in cognitive and other mobility-relevant skills develop between low- and high-income kids, particularly in the United States and the United Kingdom. Such disparities may be mitigated by investments in early childhood education, as Christelle Dumas and Arnaud Lefranc demonstrate. They find that universal pre-school education in France lessens the negative effect of low parental SES and gives low-income children a greater shot at social mobility. Katherine Magnuson, Jane Waldfogel, and Elizabeth Washbrook find that income-based gaps in cognitive achievement in the United States and the United Kingdom widen as children reach adolescence. Robert Haveman and his coauthors show that the effect of parental income on test scores increases as children age; and in both the United States and Canada, having parents with a higher income betters the chances that a child will enroll in college.
As economic inequality in the United States continues to rise, the national policy conversation will not only need to address the devastating effects of rising inequality in this generation but also the potential consequences of the decline in mobility from one generation to the next. Drawing on unparalleled international datasets, From Parents to Children provides an important first step
This paper draws on the Luxembourg Income Study (LIS) microdata to paint a portrait of child poverty across a diverse group of countries, as of 2004-2006. We will first synthesize past LIS-based research on child poverty, focusing on studies that aim to explain cross-national variation in child poverty rates. Our empirical sections will focus on child poverty in 20 high- and middle-income countries including three Latin American countries, newly added to LIS. We will assess poverty among all households and among those with children, and using multiple poverty measures (relative and absolute, pre- and post-taxes and transfers). We will assess the effects of crucial micro-level factors - family structure, educational attainment, and labor market attachment - considering how the effects of these factors vary across counties. Finally, we will analyze the extent to which cross-national variation in child poverty is explained by families' characteristics and/or by the effects of (or returns to) those characteristics. Those returns encompass both market and state-generated income.
This paper considers the role of gender in generating inequality of opportunity. Using data on long-run income for Swedish men and women, we explore to what extent income inequality is due to circumstances beyond individuals' control, such as gender and parental income, rather than to differences in individuals' choices. The key idea is that a society has achieved equality of opportunity if there is no income inequality that is due to circumstances. Analyzing men and women separately, we find that circumstances account for up to 31% of income inequality among men and up to 25% among women. We conclude that there is greater equality of opportunity among women than among men. When we analyze men and women together, treating gender as a circumstance, at most 38% of income inequality can be attributed to circumstances. Gender accounts for up to 13% of income inequality, making gender the single most important circumstance in accounting for inequality in long-run income in Sweden.
This study explores how life expectancy at age 35 has evolved across the income distribution in Sweden over time. We examine individual income for men 1970–2007 and family income for both men and women 1980–2007. During this period, income inequality increased in most western countries, but especially so in Sweden. Drawing on a large sample of the Swedish population, our results show that the gap in life expectancy between the richest and poorest fifths of the income distribution also increased. This was the case both for individual and family income. The increase was larger for men than for women, but the only group with stagnant life expectancy at age 35 was women in the lowest income quintile group. Between 1986 and 2007, the difference between the lowest and highest family income quintiles increased by about one year for women and by almost two years for men. The causes of death that most significantly contributed to the increased disparities among women were circulatory and respiratory diseases. For men, circulatory disease mortality alone caused most of the increased disparities.
Grouped data in the form of income shares have conventionally been used to estimate income inequality due to the lack of individual records. We present a systematic evaluation of the performance of parametric distributions and non-parametric techniques to estimate economic inequality using more than 3300 data sets. We also provide guidance on the choice between these two approaches and their estimation, for which we develop the GB2group R package. Our results indicate that even the simplest parametric models provide reliable estimates of inequality measures. The non-parametric approach, however, fails to represent income distributions accurately.
This paper analyzes the relationship between macroeconomic factors and the income distribution using data on equivalized disposable household income from the United Kingdom for 1961–99. We argue in favour of fitting a parametric functional form to the income distribution for each year, and then modeling the time series of model parameters in terms of the macroeconomic factors, as this better allows us to take into account non-stationarity in the time series. Estimates from models that relate income distribution parameters to cyclical variables in first differences (to account for non-stationarity) suggest that neither inflation nor unemployment have significant effects on income inequality. Compared to the commonly-used method of modelling the income shares directly, our approach indicates that there was no clear cut relationship between macroeconomic factors and the UK income distribution during the last third of the twentieth century.
This paper examines the measurement of social welfare, poverty, and inequality, taking into account features that have been found to be important welfare determinants in behavioral economics. Most notably, we incorporate reference-dependence, loss aversion, and diminishing sensitivity—aspects emphasized in Prospect Theory—to social welfare measurement. We suggest a new notion of equivalent income, the income level with which the individual would be as well off, evaluated using a standard concave utility function, as he actually is, evaluated with a reference-dependent utility function. We examine the differences between standard poverty and inequality measures based on observed income and measures that are calculated based on equivalent income. These differences are illustrated using household-level panel data from Russia and Vietnam.
We examine the association of income variability both within and across generations based on a heterogeneous growth model of permanent and transitory income in Sweden. Non-parametric regressions reveal that income variability is strongly associated with long-run levels of income, especially for low- and highincome earners, and that it is also strongly associated across generations.
We examine the association of income variability both within and across generations based on a heterogeneous growth model of permanent and transitory income in Sweden. Non-parametric regressions reveal that income variability is strongly associated with long-run levels of income, especially for low- and high-income earners, and that it is also strongly associated across generations.
This paper reexamines the determinants of redistribution in light of improved data and methods relative to earlier literature. In particular, we use the latest version of the UNU-WIDER's Income Inequality Database to have the best available estimates of both pre- and post-redistribution inequality for the largest set of countries and periods. We tackle head-on problems related to model specification that risk generating large biases in estimates because of mechanical associations between the dependent and explanatory variables. The results suggest that the bias in the earlier work can be substantial. The descriptive analysis highlights, in addition, how scarce the data are when it comes to information about the extent of redistribution in developing countries.
The Nordic model relies on high tax rates to finance an extensive welfare state. If labour supply elasticities are large, the burden of financing the model can be large even if, arguably, the practice of providing subsidised goods that support labour supply is likely to mitigate these effects. We utilise repeated cross sections of micro data from several countries, including the four major Nordic countries, available from the Luxembourg Income Study, LIS, to estimate labour supply elasticities, both at the intensive and extensive margins. The data span over four decades and include a large number of tax reform episodes, with tax rate variation arising both from cross-sectional and country-level differences. Using these data, we investigate whether micro and macro estimates differ in a systematic way. The results do not provide strong support for the view that elasticities at the macro level would be higher than the corresponding micro elasticities.
This paper considers a parametric model for the joint distribution of income and wealth. The model is used to analyze income and wealth inequality in five OECD countries using comparable household-level survey data. We focus on the dependence parameter between the two variables and study whether accounting for wealth and income jointly reveals a different pattern of social inequality than the traditional income only approach. We find that cross-country variations in the dependence parameter effectively account only for a small fraction of cross-country differences in a bivariate measure of inequality. The index appears primarily driven by differences in inequality in the wealth distribution.
We investigate if the association between family background and income in Sweden has changed for men born between 1932 and 1968. Our main finding is that the share of the variance in long-run income that is attributable to family background, the so-called brother correlation in income, has fallen by some 17% from 0.49 for the cohorts of brothers born in the early 1930s to below 0.32 for the cohorts born around 1950. From then on, the correlations have inched back up to around 0.37. We report suggestive evidence that the decline is driven by changes in education.
We use a research design created by forced migrations to examine the costs and benefits of leaving agriculture in mid-20th century Finland. After World War II, 11% of the Finnish population was resettled from areas ceded to the Soviet Union. Entire rural communities were moved to locations that resembled the origin areas, and displaced farmers were given land and assistance to establish new farms. Despite this policy of reconstructing the pre-war situation, forced migration increased the likelihood of switching to non-agricultural jobs and moving to urban areas. Consequently, forced migration also increased the long-term income of the displaced rural population. By contrast, forced migration decreased the income of the resettled urban population. We examine the extent to which these effects can be explained by the quality of the new farms, human capital investments, networks, and discrimination, but do not find evidence supporting these mechanisms. Instead, we argue that habit formation toward residential locations provides the most compelling rationalization for our results.