Intergenerational Mobility in Britain: Revisiting the Prediction Approach of Dearden, Machin and Reed

18 Pages Posted: 21 Feb 2008

See all articles by Ramses H. Abul Naga

Ramses H. Abul Naga

University of Bath - Department of Economics

Frank Cowell

London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)

Date Written: September 2002

Abstract

The &apos'prediction approach&apos' proposed by Dearden, Machin and Reed (DMR) consists in (1) regressing the observed incomes of the child and parent families on separate sets of predetermined variables, and (2) regressing the child&apos's predicted income on that of the parents. Conceptually, this estimator must relate to the 2SLS/IV estimator. We re-derive the prediction estimator in matrix form, and reconsider its consistency requirements. The measurement model of DMR is then embedded within a simultaneous equations framework, for which an alternative 2SLS/IV estimator is proposed. The latter produces larger estimates for the intergenerational correlation. The policy relevance of the two sets of findings is then discussed.

Suggested Citation

Abul Naga, Ramses H. and Cowell, Frank A., Intergenerational Mobility in Britain: Revisiting the Prediction Approach of Dearden, Machin and Reed (September 2002). LSE STICERD Research Paper No. 62. Available at SSRN: https://ssrn.com/abstract=1094847

Ramses H. Abul Naga (Contact Author)

University of Bath - Department of Economics ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

Frank A. Cowell

London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 (0)171-955 7277 (Phone)
+44 (0)171-242 2357 (Fax)

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