Human Capital Spill-Overs and the Geography of Intergenerational Mobility

50 Pages Posted: 20 Jan 2016 Last revised: 17 Jul 2016

See all articles by Brant Abbott

Brant Abbott

Queen's University - Department of Economics

Giovanni Gallipoli

Vancouver School of Economics, UBC; Centre for Economic Policy Research (CEPR); University of Chicago - Becker Friedman Institute for Economics; Rimini Centre for Economic Analysis

Date Written: June 16, 2016

Abstract

We develop and estimate an equilibrium model of geographic variation in the intergenerational elasticity of earnings (IGE). The theory extends the Becker-Tomes model, introducing a production sector in which workers’ human capital inputs are complements. In this setting the return to parental human capital investments is lower where skill complementarity is more intense, and this is reflected in less intergenerational persistence. We also show that education subsidies may be more desirable where skill complementarities are stronger, endogenously leading to a negative correlation between progressive public policy and IGE. Using microdata we construct location-specific measures of skill complementarity and document that patterns of geographic variation in IGE are consistent with this hypothesis. Geographic differences in skill complementarity directly account for roughly one fifth of cross-country variation in IGE, and possibly more if one allows for the indirect effect through government expenditure in public education.

Keywords: social mobility, technology, inequality, human capital, production

JEL Classification: E10, E20, D10, D3, D50, D60, D70

Suggested Citation

Abbott, Brant and Gallipoli, Giovanni, Human Capital Spill-Overs and the Geography of Intergenerational Mobility (June 16, 2016). Available at SSRN: https://ssrn.com/abstract=2717647 or http://dx.doi.org/10.2139/ssrn.2717647

Brant Abbott

Queen's University - Department of Economics ( email )

99 University Avenue
Kingston K7L 3N6, Ontario
Canada

Giovanni Gallipoli (Contact Author)

Vancouver School of Economics, UBC ( email )

6000 Iona drive
Vancouver, BC BC V6T 1L4
Canada

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

University of Chicago - Becker Friedman Institute for Economics ( email )

Chicago, IL 60637
United States

Rimini Centre for Economic Analysis ( email )

Rimini
Italy

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