Local Intergenerational Elasticities

11 Pages Posted: 28 Aug 2018 Last revised: 26 Apr 2019

See all articles by Brantly Callaway

Brantly Callaway

University of Mississippi - Department of Economics

Weige Huang

Temple University

Date Written: April 15, 2019

Abstract

The intergenerational elasticity (IGE) is the most common parameter reported in the intergenerational mobility literature. This paper proposes a "local" intergenerational mobility parameter (LIGE) that allows the effect of parents' income to vary across different values of parents' income. We also extend this result to an "adjusted" local intergenerational elasticity (ALIGE) which adjusts for differences in the distribution of observed characteristics at different values of parents' income. We develop the asymptotic properties of the LIGE and ALIGE, and apply them to study intergenerational mobility using data from the PSID. We find that the intergenerational elasticity is much larger for low values of parents' income (indicating less mobility) relative to high values of parents' income; adjusting for differences in characteristics reduces the local IGE at all values of parents' income as well as flattening it across different values of parents' income.

Keywords: Intergenerational Income Mobility, Local Linear Estimation, Smooth Coefficient Model

JEL Classification: J62, C21

Suggested Citation

Callaway, Brantly and Huang, Weige, Local Intergenerational Elasticities (April 15, 2019). Available at SSRN: https://ssrn.com/abstract=3233873 or http://dx.doi.org/10.2139/ssrn.3233873

Brantly Callaway

University of Mississippi - Department of Economics ( email )

371 Holman Hall
University, MS 38677
United States

Weige Huang (Contact Author)

Temple University ( email )

Philadelphia, PA 19122
United States

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