Local Intergenerational Mobility

Abstract

Using NLSY data we investigate whether the observed patterns of economic mobility (as measured by income and educational attainment) exhibit heterogeneity across socioeco- nomic groups and whether the nature of the heterogeneity can be explained by different levels of persistence in the intergenerational transmission of cognitive and non-cognitive abilities across these groups. In doing so we employ the varying coefficient model (VCM) to estimate nonparametric (local) measures of intergenerational mobility of those outcome variables. By local we mean that the persistence coefficients are modeled as smooth func- tions of log parental permanent income. Our findings show that intergenerational mobility exhibits nonlinear patterns. Individuals with different parental income are characterized by different degrees of intergenerational mobility. Moreover, we find evidence that sug- gests cognitive abilities play a role in explaining intergenerational mobility. These findings provide some support for a new class of family investment models that emphasize the role of such abilities in economic mobility.

Keywords: intergenerational income mobility, varying coefficient models, non-cognitive skills, cognitive skills

JEL Classification: C14, I14, I24