Intergenerational Earnings Mobility Revisited: Estimates Based on Lifetime Earnings

Abstract

Using Norwegian intergenerational data, which include a substantial part of the life‐cycle earnings for children and almost the entire life‐cycle earnings for their fathers, we present new estimates of intergenerational mobility. Extending the length of fathers’ earnings window from 5 to 25 years increases estimated elasticities. Increasing the age at which fathers’ earnings are observed has the opposite effect. Biases in the estimated elasticities are related to both transitory earnings variation and life‐cycle measurement error; the former appear to be more important than the latter. Estimation bias stemming from persistence in transitory innovations plays only a minor role. Our findings indicate that intergenerational earnings mobility in Norway might have been strongly overstated in many earlier studies with shorter earnings histories. Some of our new estimates are twice as large as earlier estimates.

Keywords: Intergenerational mobility, measurement error

JEL Classification: J62, C23