Geographic Effects on Intergenerational Income Mobility

Forthcoming, in Economic Geography

47 Pages Posted: 29 Jun 2014 Last revised: 29 Dec 2015

See all articles by Jonathan T. Rothwell

Jonathan T. Rothwell

Gallup; George Washington University Institute of Public Policy; Brookings Institution

Douglas S. Massey

Princeton University - Department of Sociology

Date Written: June 20, 2014

Abstract

Research on intergenerational economic mobility often ignores the geographic context of childhood, including neighborhood quality and local purchasing power. We hypothesize that individual variation in intergenerational mobility is partly attributable to regional and neighborhood conditions — most notably access to high quality schools. Using restricted Panel Study of Income Dynamics and census data, we find that neighborhood income has roughly half the effect on future earnings as parental income. We estimate that lifetime household income would be $635,000 dollars higher if people born into a bottom quartile neighborhood would have been raised in a top quartile neighborhood. When incomes are adjusted to regional purchasing power, these effects become even larger. The neighborhood effect is two-thirds as large as the parental income effect and the lifetime earnings difference increases to $910,000. We test the robustness of these findings to various assumptions and alternative models and replicate the basic results using aggregated metropolitan level statistics of intergenerational income elasticities based on millions of IRS records.

Keywords: income mobility, inequality, segregation, neighborhood effects, regional purchasing power

JEL Classification: J6, J7, Z1

Suggested Citation

Rothwell, Jonathan T. and Massey, Douglas S., Geographic Effects on Intergenerational Income Mobility (June 20, 2014). Forthcoming, in Economic Geography, Available at SSRN: https://ssrn.com/abstract=2460101 or http://dx.doi.org/10.2139/ssrn.2460101

Jonathan T. Rothwell (Contact Author)

Gallup ( email )

901 F St NW
Washington, DC 20004
United States

George Washington University Institute of Public Policy ( email )

2121 I Street NW
Washington, DC 20052
United States

Brookings Institution ( email )

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

Douglas S. Massey

Princeton University - Department of Sociology ( email )

Princeton, NJ
United States

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