The Political Economy of Intergenerational Income Mobility

Andrea Ichino, Loukas Karabarbounis and Enrico Moretti

No 4767, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 (search for similar items in EconPapers)
JEL-codes: E24 J62 J68 P16 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2010-02
New Economics Papers: this item is included in nep-ltv and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published - published in: Economic Inquiry, 2011, 49 (1), 47-69

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Related works:
Journal Article: THE POLITICAL ECONOMY OF INTERGENERATIONAL INCOME MOBILITY (2011)
Working Paper: The political economy of intergenerational income mobility (2010)
Working Paper: The Political Economy of Intergenerational Income Mobility (2010)
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