The Intergenerational Mobility of Income: A Study Applied to the Spanish Case (2005–2011)

Intergenerational income mobility has attracted the interest of many economists for—among other reasons—its role as a mechanism for reducing inequalities and achieving equal opportunities. In this paper, we analyse the intergenerational mobility of income in Spain in the years 2005 and 2011, located at different phases of the economic cycle. We use proxy variables (the economic situation of the household during the adolescence of the informant and the educational level achieved by parents) to study intergenerational income mobility, because there are not extant surveys with income information from parents and their descendants when they are part of a different household. With these variables, we try to verify the existence and degree of mobility by analysing different methodologies. The results suggest the existence of mobility in the two studied years, although a trend towards a reduction in intergenerational mobility is confirmed, already detected by other authors.

When less conditioning provides better estimates: overcontrol and endogenous selection biases in research on intergenerational mobility

The counterfactual approach to causality has become the dominant approach to understand causality in contemporary social science research. Whilst most sociologists are aware that unobserved, confounding variables may bias the estimates of causal effects (omitted variable bias), the threats of overcontrol and endogenous selection biases are less well known. In particular, widely used practices in research on intergenerational mobility are affected by these biases. I review four of these practices from the viewpoint of the counterfactual approach to causality and show why overcontrol and endogenous selection biases arise when these practices are implemented. I use data from the German Socio-Economic Panel Study (SOEP) to demonstrate the practical consequences of these biases for conclusions about intergenerational mobility. I conclude that future research on intergenerational mobility should reflect more upon the possibilities of bias introduced by conditioning on variables.

Firms and the Intergenerational Transmission of Labor Market Advantage

Recent research finds that pay inequality stems both from firm pay-setting and from workers’ individual characteristics. Yet, intergenerational mobility research remains focused on transmission of individual traits, and has failed to test how firms shape the inheritance of inequality. We study this question using three decades of Swedish population register data, and decompose the intergenerational earnings correlation into firm pay premiums and stable worker effects. One quarter of the intergenerational earnings correlation at midlife is explained by sorting between firms with unequal pay. Employer or industry inheritance account for a surprisingly small share of this firm-based earnings transmission. Instead, children from high-income backgrounds benefit from matching with high-paying firms irrespective of the sources of parents’ earnings advantage. Our analysis reveals how an imperfectly competitive labor market provides an opening for skill-based rewards in one generation to become class-based advantages in the next.

Measuring Social Mobility in Historic and Less Developed Societies

In societies where surnames are inherited from parents, we can use these names to estimate rates of intergenerational mobility. This chapter explains how to make such estimates, and illustrates their use in pre-industrial England and modern Chile and India. These surname estimates have the advantage that they require much less data than traditional parent–child estimates. They are also more robust to errors in status data. Thus, they can be used to estimate social mobility rates in early societies such as England 1300–1800, or in less developed societies now. Surnames measure a different aspect of social mobility than conventional measures, but this surname measure is the one that matters when we consider group-level convergence of social status, or the time needed for any disadvantaged groups to attain at least average status measured in generations. Surnames thus allow us to measure a key element in the multigenerational mobility process.

Social Mobility and Horizontal Inequality

Research on social mobility has paid considerable attention to links with inequality. The vast majority of this work, however, has focused on ‘vertical’ inequality between individuals or households, rather than ‘horizontal’ inequality between groups in society. This chapter speaks to the latter, with focus on the persistence over time of horizontal inequalities between ethnic and culturally defined groups. Not only is such persistence due to low intergenerational mobility overall, we argue, it also is due to lower mobility for disadvantaged as compared with advantaged groups in many societies. Group-based discrimination, among other factors, contributes. We posit further that the relationship between low mobility and persistent horizontal inequality is a comparatively larger problem for Global South as compared to Global North countries, because they are, on average, contexts with lower intergenerational mobility, higher horizontal inequality, and weaker state capability and the rule of law.

Economic Approach to Intergenerational Mobility

This chapter provides an analytical survey and synthesis of economic literature on intergenerational mobility in developing countries, with a focus on data and methodological challenges. Sample truncation from co-residency and measurement error cause substantial downward bias in intergenerational regression coefficient, whereas intergenerational correlation and intergenerational rank correlation are more robust to such data limitations. To understand heterogeneity, reliable estimates of both the intercept and the slope are necessary. The OLS estimate of the intercept is biased upward, but less so in the rank–rank regression. Sibling correlation is a broader measure of mobility, especially convenient with limited data. Estimating intergenerational causal effects is challenging as it requires long panel data. A promising alternative is to focus on the causal effects of policies on measurement of relative and absolute mobility, without disentangling the role of genetic inheritance.

In Praise of Snapshots

The conventional justification for moving from income distribution to intergenerational mobility analysis is that the movie encompasses the snapshot and is normatively superior as the basis for assessing policy. Such a perspective underpins many an argument for shifting the focus from income redistribution, which is said to equalize outcomes, to equalizing opportunity by increasing mobility through education policy such as equal provision of public education. This chapter argues that this perspective can be misleading. It shows that normative evaluation of income mobility in any event often falls back on a snapshot perspective. Further, the snapshot itself often contains the seeds of the movie, as posited in the Great Gatsby Curve. Income redistribution can itself improve mobility even if that is the only objective. The chapter thus speaks in praise of snapshots.