One size doesn’t fit all

Working Paper 2014-349

Abstract

Using family income from the Panel Study of Income Dynamics (PSID), we apply Quantile Regression to estimate the Intergenerational Income Elasticity (IGE) by percentiles in the U.S. from 1980 to 2010. For the whole period, the IGE shows a Ushape across the income distribution, with maximum values at the tails (0.66 at the 10th percentile and 0.48 at the 90th percentile) and a minimum value –highest mobility- of 0.37 at the 70th percentile. These values contrast with the Ordinary Least Square estimate, which is 0.47. The trend evolution of the IGE varies also across the income distribution. While for all percentiles up to the median (and OLS) the trend of IGE was decreasing in the 80s and 90s and slightly increasing in the 00s, the IGE remained relatively stable for the richer along the whole period. With respect to the channels of intergenerational income transmission, son’s education and race were found to be important.

Authors: Juan C. Palomino, Gustavo A. Marrero, Juan G. Rodriguez.