Earnings Dynamics and Its Intergenerational Transmission: Evidence from Norway

115 Pages Posted: 22 Mar 2021 Last revised: 17 Dec 2021

See all articles by Elin Halvorsen

Elin Halvorsen

Statistics Norway - Research Department; University of Oslo - Department of Economics

Serdar Ozkan

Federal Reserve Banks - Federal Reserve Bank of St. Louis; University of Toronto

Sergio Salgado

The Wharton School, University of Pennsylvania

Multiple version iconThere are 2 versions of this paper

Date Written: December 16, 2021

Abstract

Using administrative data from Norway, we first present stylized facts on labor earnings dynamics between 1993 and 2017 and its heterogeneity across narrow population groups. We then investigate the parents' role in children's income dynamics—the intergenerational transmission of income dynamics. We find that children of high-income, high-wealth fathers enjoy steeper income growth over the life cycle and face more volatile but more positively skewed income changes, suggesting that they are more likely to pursue high-return, high-risk careers. Children of poorer fathers also face more volatile incomes, but theirs grow more gradually and are more left skewed. Furthermore, the income dynamics of fathers and children are strongly correlated. In particular, children of fathers with steeper life-cycle income growth, more volatile incomes, or higher downside risk also have income streams of similar properties. We also confirm that fathers' significant role in workers' income dynamics is not simply spurious because of omitted variables, such as workers' own permanent income. These findings shed new light on the determinants of intergenerational mobility.

Keywords: Earnings dynamics, income inequality, Pareto tails, heterogeneity, intergenerational mobility

JEL Classification: E24, J24, J31

Suggested Citation

Halvorsen, Elin and Ozkan, Serdar and Salgado, Sergio, Earnings Dynamics and Its Intergenerational Transmission: Evidence from Norway (December 16, 2021). Available at SSRN: https://ssrn.com/abstract=3789289 or http://dx.doi.org/10.2139/ssrn.3789289

Elin Halvorsen

Statistics Norway - Research Department ( email )

Akersveien 26
Postboks 2633 St. Hanshaugen
Oslo, Oslo 0131
Norway

University of Oslo - Department of Economics

Norway

Serdar Ozkan

Federal Reserve Banks - Federal Reserve Bank of St. Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

University of Toronto ( email )

105 St George Street
Toronto, Ontario M5S 3G8
Canada

Sergio Salgado (Contact Author)

The Wharton School, University of Pennsylvania ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

HOME PAGE: http://https://sergiosalgadoi.wordpress.com/

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