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Federal Reserve Bank of Chicago
Working Paper Series
Intergenerational economic mobility in the U.S., 1940 to 2000
Daniel Aaronson
Bhashkar Mazumder
Abstract

We use two sample instrumental variables to estimate intergenerational economic mobility from 1940 to 2000. We find intergenerational mobility increased from 1940 to 1980 but declined sharply thereafter, a pattern similar to cross-sectional inequality trends. However, the returns to education account for only some of these patterns. The time- series may help to reconcile previous findings in the intergenerational mobility literature. Our estimates imply a somewhat different pattern for the intergenerational income correlation, a measure insensitive to changes in cross-sectional inequality that has implications for rank mobility. We find the post-1980 decline in intergenerational rank mobility marks a return to historical levels. Consequently, by 2000, the rate of intergenerational movement across the income distribution appears historically normal, but, as cross-sectional inequality has increased, earnings are regressing to the mean at a slower rate, causing economic differences between families to persist longer than earlier in the century.


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Daniel Aaronson & Bhashkar Mazumder, Intergenerational economic mobility in the U.S., 1940 to 2000, Federal Reserve Bank of Chicago, Working Paper Series WP-05-12, 2005.
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Keywords: Income ; Labor mobility
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