A Theory of Intergenerational Mobility
20 Pages Posted: 1 Sep 2015 Last revised: 22 Mar 2018
Date Written: March 18, 2018
We study the link between market forces, cross-sectional inequality, and intergenerational mobility. Emphasizing complementarities in the production of human capital, we show that wealthy parents invest, on average, more in their offspring than poorer ones. As a result, economic status persists across generations even in a world with perfect capital markets and absent differences in innate ability. In fact, under certain conditions, successive generations of the same family may cease to regress towards the mean. We also consider how short- and long-run mobility are affected by changes in the returns to human capital.
Keywords: intergenerational mobility, inequality, human capital, complementarities
JEL Classification: J01, D10, D31
Suggested Citation: Suggested Citation