Interpreting trends in intergenerational mobility
What is this research about and why did you do it?
How should trends in intergenerational mobility be interpreted—do they reflect changes in the effectiveness of current policies and institutions in promoting equal opportunities? Our contribution is to provide a dynamic perspective on this question. We show that contemporaneous shifts in income mobility can be caused by events in a more distant past, as structural changes generate transitional dynamics in mobility over multiple generations. Such dynamic responses are of particular importance when persistence, as even a single transmission step—one generation—corresponds to a long time period.
How did you answer this question?
We first describe a simple dynamic model of intergenerational transmission based on a system of linear difference equations. We summarize the dynamic implications of the model and discuss specific cases and applications that illustrate our main arguments. We then illustrate these arguments in two applications. First, we revisit the evidence on mobility trends in the United States. Second, we examine a Swedish compulsory-school reform to provide causal evidence for our key theoretical argument—that shocks in the economic environment in the parent generation can still affect mobility trends in the next generation.
What did you find?
We show that the level of intergenerational mobility depends not only on contemporaneous transmission mechanisms, but also on the joint distribution of income and skills in the parent generation—and thus on past mechanisms. This has several implications. First, a one-time policy or institutional change tends to generate long-lasting mobility trends, which can amplify in magnitude. Second, a broad class of structural changes cause non-monotonic transitions between steady states. The figure provides an example: after a structural change that makes the distribution of income more meritocratic, the intergenerational elasticity of income decreases in the first generation but then shifts upwards in the next generations.
Transitional dynamics in the intergenerational elasticity of income after equalizing opportunities (Simulation).
What implications does this have for the study (research and teaching) of wealth concentration or economic inequality?
When studying intergenerational mobility trends over time, researchers should link those trends not just to recent structural and policy changes, but also to changes and shocks that affected previous generations. By studying the evolution of the covariance between parental income and other parental characteristics, one can distinguish whether contemporaneous shifts in income mobility are due to recent events, or whether they are caused by events in the more distant past.
What are the next steps in your agenda?
We would like to understand better how major structural shocks, such as wars or large economic shocks, affect mobility trends over subsequent generations. One methodological question is whether the dynamic effects of such past shocks can be isolated in current trends.
Citation and related resources
Nybom, Martin and Jan Stuhler, (2024) “Interpreting Trends in Intergenerational Mobility”, Journal of Political Economy, 132(8), p. 2531-2570.
Related resources:
- In their post “Creative Disruption: Systemic Shocks and Social Mobility” at the Brookings Institution, Edward Rodrigue and Richard V. Reeves discuss the implications from their research.
