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A Theory of Intergenerational Mobility

41 Pages Posted: 1 Sep 2015  

Gary S. Becker

University of Chicago - Department of Economics; University of Chicago - Booth School of Business

Scott Duke Kominers

Harvard University

Kevin M. Murphy

University of Chicago; National Bureau of Economic Research (NBER)

Jörg L. Spenkuch

Northwestern University - Department of Managerial Economics and Decision Sciences (MEDS)

Date Written: August 28, 2015

Abstract

We develop a model of intergenerational resource transmission that emphasizes the link between cross-sectional inequality and intergenerational mobility. By drawing on first principles of human capital theory, we derive several novel results. In particular, we show that, even in a world with perfect capital markets and without differences in innate ability, wealthy parents invest, on average, more in their offspring than poorer ones. As a result, persistence of economic status is higher at the top of the income distribution than in the middle. Successive generations of the same family may even cease to regress towards the mean. Moreover, we demonstrate that government interventions intended to ameliorate inequality may in fact lower intergenerational mobility — even when they do not directly favor the rich. Lastly, we consider how mobility is affected by changes in the marketplace.

Keywords: intergenerational mobility, inequality, human capital, complementarities

JEL Classification: J01, D10, D31

Suggested Citation

Becker, Gary S. and Kominers, Scott Duke and Murphy, Kevin M. and Spenkuch, Jörg L., A Theory of Intergenerational Mobility (August 28, 2015). Available at SSRN: https://ssrn.com/abstract=2652891 or http://dx.doi.org/10.2139/ssrn.2652891

Gary S. Becker

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

University of Chicago - Booth School of Business

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Scott Duke Kominers

Harvard University ( email )

Rock Center
Harvard Business School
Boston, MA 02163
United States

HOME PAGE: http://www.scottkom.com/

Kevin M. Murphy

University of Chicago ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7280 (Phone)
773-702-2699 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jörg L. Spenkuch (Contact Author)

Northwestern University - Department of Managerial Economics and Decision Sciences (MEDS) ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

HOME PAGE: http://kellogg.northwestern.edu/faculty/spenkuch/

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