Extract from Income Inequality, Equality of Opportunity, and Intergenerational Mobility

Transcription

1 Extract from, Equality of Opportunity, and Intergenerational Mobility by Miles Journal of Economic Perspectives, 27(3): (2013). James J. Heckman University of Chicago AEA Continuing Education Program ASSA Course: Microeconomics of Life Course Inequality San Francisco, CA, January 5-7, 2016

2 82 Journal of Economic Perspectives Figure 1: The Great Gatsby Curve: More Inequality is Associated with Figure 1 Less Mobility across The Great Gatsby the Curve: Generations More Inequality is Associated with Less Mobility across the Generations Generational earnings elasticity (less mobility ) Sweden Finland Norway Denmark Germany New Zealand France Income inequality (more inequality ) Italy Japan Australia United Kingdom United States Source: (2013) andsource: OECD. (2013) and OECD. Notes: Income inequality is measured as the Gini coefficient, using disposable household Notes: Income inequality is measured as the Gini coefficient, using disposable household income for about 1985 as provided about 1985 as provided by the OECD. Intergenerational economic mobility is measured as the elasticity by the OECD. Intergenerational between paternal economic earnings mobility and a son s is measured adult earnings, as using thedata elasticity on a cohort between of children paternal born, roughly earnings and a sons adult earnings, using data on a cohort speaking, of during children the early born, to mid roughly 1960s and speaking, measuring their during adult outcomes the early in the to midto late 1960s 1990s. and measuring their adult outcomes in the mid to late The 1990s. estimates The of the estimates intergenerational of the earnings intergenerational elasticity are derived earnings from published elasticity studies, are adjusted derived from published for methodological way that I describe in the appendix to (2006), updated studies, adjusted for methodological comparability in a way that I describe in the appendix to (2006), updated with a with a more recent literature review reported in (2013), where I also offer estimates for a total of more recent literature review 22 countries. reported I only inuse estimates (2013), derived from where data Ithat also are offer nationally estimates representative for of a the total population of 22 countries. I only use estimates derived from data and that which are rich nationally enough to make representative comparisons across of the generations population within the and same which family. are In addition, rich enough to make comparisons across generations I only use within studies that thecorrect samefor family. the type In of measurement addition, Ierrors onlydescribed use studies by Atkinson, thatmaynard, correct and for the type of Trinder (1983), Solon (1992), and Zimmerman (1992), which means deriving permanent earnings by measurement errors described either by averaging Atkinson, annual data Maynard, over several and years Trinder or by using (1983), instrumental Solon variables. (1992), and Zimmerman (1992), which means deriving permanent earnings by either averaging annual data over several years or by using instrumental variables.

3 84 Journal of Economic Perspectives Figure 2: Earnings Deciles of Sons Born to Top Decile Fathers: United States Figure and 2 Earnings Deciles of Sons Born to Top Decile Fathers: United States and Probability of falling in the decile United States 0.00 Bottom 2nd 3rd 4th 5th 6th 7th 8th 9th Top Sons earning dectile Source: and Heisz (1999, table 6); Mazumder (2005, table 2.2). Source: and Heisz (1999, table 6); Mazumder (2005, table 2.2).

4 Source: and Heisz (1999, table 6); Mazumder (2005, table 2.2). Figure 3: Earnings Deciles of Sons Born to Bottom Decile Fathers: Figure 3 United States and Earnings Deciles of Sons Born to Bottom Decile Fathers: United States and Probability of falling in the decile United States 0.00 Bottom 2nd 3rd 4th 5th 6th 7th 8th 9th Top Sons earning dectile Source: and Heisz (1999, table 6); Mazumder (2005, table 2.2). Source: and Heisz (1999, table 6); Mazumder (2005, table 2.2).

5 , Equality of Opportunity, and Intergenerational Mobility 87 Figure 4: Higher Returns to Schooling are Associated with Lower Figure 4 Intergenerational Higher Returns Earnings to Schooling Mobility are Associated with Lower Intergenerational Earnings Mobility Generational earnings elasticity (less mobility ) Italy United Kingdom United States France Spain Japan New Zealand Germany Sweden Australia Finland Norway Denmark College earnings premium (men 25 to 34) Source: Author using Source: data Author fromusing OECD data (2011b, from OECD table (2011b, A8.1), table and A8.1), and (2013). (2013). Notes: The earnings Notes: premium The earnings refers premium to the ratio refers ofto average the ratio earnings of average of earnings men 25of to men 3425 years to 34 of years ageof with age with a college degree to the average earnings ofa those college with degree a high to the school average diploma. earnings This of those is measured with a high as school the average diploma. employment This is measured income as in 2009 of men 25 to 34 years of age with the average a college employment degree relative income in to2009 the of average men 25 income to 34 years of their of age counterparts with a college with degree a high relative school diploma (OECD 2011b, table to A8.1). the average Intergenerational income of their economic counterparts mobility with a high is measured school diploma as the(oecd elasticity 2011b, between table A8.1). paternal earnings and a sons adult earnings, Intergenerational using data economic a cohortmobility of children is measured born, as roughly the elasticity speaking, between during paternal theearnings early toand mid a son s 1960s and measuring adult outcomes in the adult mid earnings, to late using 1990s data (see on a cohort notes of tochildren Figureborn, 1). roughly speaking, during the early to mid 1960s and measuring adult outcomes in the mid to late 1990s (see notes to Figure 1).

6 Figure 5: Figure The 5 Higher the Return to College, the Lower the Degree of The Higher the Return to College, the Lower the Degree of Intergenerational Intergenerational Mobility: United States, 1940 to 2000 Mobility: United States, 1940 to 2000 Returns to college 14% 12% 10% 8% 6% 4% 2% 0.1 Returns to college Intergenerational elasticity 0% Intergenerational elasticity ( less mobility) Source: Adapted Source: by Adapted the author by the from author Mazumder from Mazumder (2012, Figure (2012, 1). Figure 1). Notes: Information Notes: Information on the returns on the to college returns and to college the intergenerational and the intergenerational earnings elasticity earnings were elasticity provided were to provided the author by Bhashkar Mazumder. to the author As reported by Bhashkar in Mazumder Mazumder. (2012), As reported these are in respectively Mazumder (2012), from Goldin these and are Katz respectively (1999) from and Aaronson and Mazumder Goldin (2008, and table Katz 1(1999) column and 2). Aaronson The 1940and estimate Mazumder of the (2008, elasticity table is 1 acolumn projection 2). The using 1940 Aaronson estimate and of Mazumder (2008, table the 2 column elasticity 2). is a projection using Aaronson and Mazumder (2008, table 2 column 2).

7 Figure 6: Figure Money 6 Matters: Higher-Income Families in the United States Money Matters: Higher-Income Families in the United States Have Higher Have Higher Enrichment Expenditures on Their Children Enrichment Expenditures on Their Children Expenditures per child (in 2008 dollars) $10,000 $7,500 $5,000 $2,500 3, Top income quintile Bottom income quintile 5,650 6,975 8,872 1,264 1,173 1,315 $ to to to to 2006 Source: Duncan, Greg J. and Richard J. Murnane. Figure 1.6 Enrichment Expenditures on Children, Source: Duncan, Greg J. In and Whither Richard Opportunity, J. Murnane. edited Figure by Greg 1.6 Enrichment J. Duncan and Expenditures Richard J. Murnane, on Children, Russell In Whither Opportunity, Sage edited Foundation, by Greg J. 112 Duncan East 64th andstreet, Richard New J. York, Murnane, NY Reprinted Russell Sage with Foundation, permission. 112 East 64th Street, New York, NY Note: Reprinted Enrichment withexpenditures permission. refers to the amount of money families spend per child on books, Notes: Enrichment computers, expenditures high-quality refers child care, to the summer amount camps, of money private families schooling, spend and per other child things on books, that promote computers, the high-quality child care, summer capabilities camps, of their private children. schooling, and other things that promote the capabilities of their children.

8 94 Journal of Economic Perspectives Figure 7: Proportion of Sons Currently Employed or Employed at Some Figure 7 Point with an Employer Proportion of Sons their Currently Father Employed or had Employed Worked at Some Point for with in an the Past: Employer their Father had Worked for in the Past: and Denmark and Denmark (by fathers earnings percentile) (by father s earnings percentile) Incidence of same firm employment Denmark Father s earnings percentile Source: Bingley, Paul, Miles, and Niels Westergard-Nielson. Figure 18.2 Sons Employed at Some Source: Bingley, Paul, Miles Point, with Employer and Niels Fathers Westergard-Nielson. Worked for, by Fathers Earnings. Figure In 18.2 From Sons Parents Employed to Children: at The Some Point with Employer Fathers Worked for, by Fathers Intergenerational Earnings. Transmission In From of Advantage, Parents edited to Children: by John Ermisch, The Intergenerational Markus Jantti, and Timothy Transmission of Advantage, Smeeding, 2012 Russell Sage Foundation, 112 East 64th Street, New York, NY Reprinted edited by John Ermisch, Markus Jantti, and Timothy Smeeding, 2012 Russell Sage Foundation, 112 East 64th Street, New with permission. York, NY Reprinted with permission. there is intergenerational transmission of firm-specific skills, then children inherit human capital that has a higher return when they are employed by the Income family firm. Inequality