What do trends in the intergenerational economic mobility of sons and daughters in the United States mean?

The extent to which economic status is transmitted from one generation to the next has interested social scientists and policy makers because of the belief that the intergenerational transmission of economic status violates norms of equal opportunity. But, as this chapter shows, parents’ and children’s economic status can be correlated for many reasons, some of which may not violate norms of equal opportunity. In fact, some social changes that ostensibly promote equality of opportunity may raise the intergenerational correlation. Economists usually estimate intergenerational economic mobility by estimating the percentage increase in a child’s income for each percentage point increase in parents’ income. Formally, the relationship between parents’ economic status (Yp) and a child’s (Yc) economic status (in adulthood) is estimated as: In this equation, ß is the elasticity of children’s income with respect to parents’ income. As discussed in Chapter 2, the economic model underlying this estimate is a human capital model in which a child’s economic status is a function of parental endowments and monetary investments. Endowments include characteristics, such as IQ and eye color, influenced by biology and genes. Monetary investments are goods and services that help children succeed, such as nutritious meals, schooling, We wish to thank Miles Corak, Thomas DeLeire, Angela Fertig, Christopher Jencks, Helen Levy, and participants in seminars at the University of Chicago and Harvard University as well as participants at the workshop sponsored by Statistics Canada in Ottawa in February 2001 for helpful comments and suggestions. and health care. According to this model, affluent parents can afford to invest more in their children. As a result, their children are more likely than children of low-income parents to become affluent once they are adults.