The long-run evolution of absolute intergenerational mobility
What is this research about and why did you do it?
This paper is about an understudied, yet important, aspect of social mobility – absolute mobility. Absolute mobility measures the share of children with higher incomes compared to their parents around the same age. In a growing economy, we expect this share to be very high, and even close to 100%. Yet, to what extent it is indeed the case, we do not know. This research estimates this share over the course of the 20th century in ten rich economies across four continents.
How did you answer this question?
To estimate absolute mobility, one has to link parents and children across generations. This is a difficult task, which typically requires data that cannot be found in many places, especially if we are interested in historical data. This required establishing a methodology (building on previous work by Chetty et al. (2017)) that allows estimating absolute mobility with plausible accuracy without such rich and rare data. I then used income data from the World Inequality Database combined with existing knowledge from the literature on relative mobility in different countries for that purpose.
What did you find?
The paper has two main findings: First, absolute mobility decreased during the second half of the twentieth century in all the countries studied. It is close to 100% in most countries for 1930s-1950s cohorts. But for children born in the 1980s, it can be as low as 55% in some countries. About half of the children born in this decade in those countries do not exceed their parents’ incomes as adults.
Second, I find that increasing income inequality and decreasing growth rates have both contributed to the decreasing absolute mobility, yet growth is the dominant contributor in most countries.
The chart shows the evolution of absolute intergenerational mobility in ten advanced economies over the 20th century. In each case the estimates represent the share of adults with higher real income than their parents around the same age. The comparison is done so that each cohort's year represents adults who were born in that year, and their incomes are estimated 30 years later. For example, about 90% of the people born around 1950 in France had higher incomes than their parents at the age of 30. The children's incomes are estimated at 1980, while the parents' incomes are estimated in 1950.
What implications does this have for the research on wealth concentration or economic inequality?
The study can be used for teaching about different concepts of social mobility. It also includes a methodological importance for how to combine cross-sectional data, which are quite common, to produce synthetic panels. This is a useful methodology that could be used in many contexts involving income and wealth distributions.
What are the next steps in your agenda?
This paper, along with many other recent papers, contributes to our knowledge about the state of social mobility, and improves our ability to measure it. The next steps, including mine, should be about studying how policy can affect social mobility.
Citation and related resources
This paper can be cited as follows: Berman, Y. (2022) 'The Long-Run Evolution of Absolute Intergenerational Mobility.' American Economic Journal: Applied Economics, 14(3), pp. 61-83.
References:
- Chetty, R., Grusky, D., Hell, M., Hendren, N., Manduca, R., and Narang, J. (2017). 'The fading American dream: Trends in absolute income mobility since 1940.' Science 356(6336), pp. 398-406.
