Alike in Many Ways: Intergenerational and Sibling Correlations of Brothers' Earnings

44 Pages Posted: 21 Nov 2012

See all articles by Paul Bingley

Paul Bingley

Aarhus University - National Centre for Register-Based Research

Lorenzo Cappellari

Catholic University of the Sacred Heart of Milan; University of Essex - Institute for Social and Economic Research (ISER); Institute for the Study of Labor (IZA)

Date Written: November 21, 2012

Abstract

We model the correlations of brothers’ life-cycle earnings separating for the first time the effect of paternal earnings from additional residual sibling effects. We identify the two effects by analyzing sibling correlations and intergenerational correlations jointly within a unified framework. Our multi-person model of earnings dynamics distinguishes permanent earnings from transitory – serially correlated — shocks, allows for life-cycle effects and nests the models of previous research that have focused either on intergenerational or sibling correlations. Using data on the Danish population of father/first-son/second-son triplets we find that sibling effects explain between one fourth and one half of inequality in life-cycle earnings, and largely account for individual differences in earnings growth. Intergenerational associations account for a considerable share of overall sibling correlations, between 30 and 60 per cent from youth to maturity. We also find that transitory shocks are correlated across family members, in particular between brothers. Extensions of the model show a distinctive effect of mothers’ human capital on top of fathers’ earnings and no evidence of differential intergenerational transmission between brothers.

Keywords: intergenerational transmission, sibling correlations, life-cycle earnings

JEL Classification: D310, J620

Suggested Citation

Bingley, Paul and Cappellari, Lorenzo, Alike in Many Ways: Intergenerational and Sibling Correlations of Brothers' Earnings (November 21, 2012). CESifo Working Paper Series No. 3994, Available at SSRN: https://ssrn.com/abstract=2178956

Paul Bingley

Aarhus University - National Centre for Register-Based Research ( email )

8000 Århus C, 8210
Denmark

Lorenzo Cappellari (Contact Author)

Catholic University of the Sacred Heart of Milan ( email )

Largo Gemelli, 1
Via Necchi 9
Milan, MI 20123
Italy

University of Essex - Institute for Social and Economic Research (ISER)

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

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