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Federal Reserve Bank of St. Louis
Working Papers
What is the source of the intergenerational correlation in earnings?
George-Levi Gayle
Limor Golan
Mehmet A. Soytas
Abstract

This paper uses a dynastic model of household behavior to estimate and decomposed the correlations in earnings across generations. The estimate model can explain 75% to 80% of the observed correlation in lifetime earnings between fathers and sons, mothers and daughters, and families across generations. The main results are that the family and division of labor within the household are the main source of the correlation across generation and not just assorting mating. The interaction of human capital accumulation in labor market, the nonlinear return to part-time versus full-time work, and the return parental time investment in children are the main driving force behind the intergenerational correlation in earnings and assortative mating just magnify these forces.


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George-Levi Gayle & Limor Golan & Mehmet A. Soytas, What is the source of the intergenerational correlation in earnings?, Federal Reserve Bank of St. Louis, Working Papers 2015-19, 24 Aug 2015.
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Subject headings:
Keywords: Intergenerational Models; Estimation; Discrete Choice; Human Capital; PSID
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