Richey, Jeremiah and Rosburg, Alicia (2016): Understanding intergenerational economic mobility by decomposing joint distributions.

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Abstract
We propose a simple and generalizable decomposition method to evaluate intergenerational economic mobility. The method decomposes the difference between the empirical parentoffspring joint distribution of incomes and a hypothetical independent parentoffspring joint distribution of incomes. The difference is attributed to (1) a portion due to a link between parental income and offspring characteristics (a composition effect) and (2) a portion due to a link between parental income and the returns to characteristics (a structure effect). The method is based on the estimation of counterfactual joint distributions consistent with (actual and counterfactual) conditional distributions estimated via distributional regression and (actual and counterfactual) distributions of covariates. The counterfactual joint distributions are then caste into common measures of mobility found in the literature: intergenerational elasticities of incomes and their quantile regression counterparts, transition matrices, summary indices of transition matrices, and upward mobility probabilities. These counterfactual measures are used to assign portions of measured (im)mobility to composition and structure effects. We apply the method to U.S. intergenerational economic mobility of white males born between 1957 and 1964. Across multiple mobility measures and using two different counterfactuals, we find that the composition effect (i.e., differences in the distribution of characteristics) generally accounts for about 6070% of the measured mobility gap. Further, we find evidence of a safetynet effect of parental income which appears to be primarily compositional in nature.
Item Type:  MPRA Paper 

Original Title:  Understanding intergenerational economic mobility by decomposing joint distributions 
Language:  English 
Keywords:  intergenerational mobility, decomposition methods 
Subjects:  C  Mathematical and Quantitative Methods > C1  Econometric and Statistical Methods and Methodology: General > C14  Semiparametric and Nonparametric Methods: General C  Mathematical and Quantitative Methods > C2  Single Equation Models ; Single Variables > C20  General J  Labor and Demographic Economics > J3  Wages, Compensation, and Labor Costs > J31  Wage Level and Structure ; Wage Differentials J  Labor and Demographic Economics > J6  Mobility, Unemployment, Vacancies, and Immigrant Workers > J62  Job, Occupational, and Intergenerational Mobility 
Item ID:  72665 
Depositing User:  Jeremiah Richey 
Date Deposited:  24 Jul 2016 06:13 
Last Modified:  24 Jul 2016 06:14 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/72665 