The political economy of intergenerational income mobility

Andrea Ichino, Loukas Karabarbounis, Enrico Moretti

Research output: Contribution to journalArticlepeer-review

34 Scopus citations

Abstract

The intergenerational elasticity of income is considered one of the best measures of the degree to which a society gives equal opportunity to its members. While much research has been devoted to measuring this reduced-form parameter, less is known about its underlying structural determinants. Using a model with exogenous talent endowments, endogenous parental investment in children, and endogenous redistributive institutions, we identify the structural parameters that govern the intergenerational elasticity of income. The model clarifies how the interaction between private and collective decisions determines the equilibrium level of social mobility. Two societies with similar economic and biological fundamentals may have vastly different degrees of intergenerational mobility depending on their political institutions. We offer empirical evidence in line with the predictions of the model. We conclude that international comparisons of intergenerational elasticity of income are not particularly informative about fairness without taking into account differences in politico-economic institutions. (JEL E24, J62, J68, P16)

Original languageEnglish (US)
Pages (from-to)47-69
Number of pages23
JournalEconomic Inquiry
Volume49
Issue number1
DOIs
StatePublished - Jan 2011

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