Matching for Social Mobility with Unobserved Heritable Characteristics

Chris Bidner and John Knowles

Discussion Papers from Department of Economics, Simon Fraser University

Abstract: We analyse the intergenerational transmission of ‘innate ability’, focusing on the role of marital sorting. The heritability of ability induces a concern for the ability of potential spouses independently of a concern for their earning capacity. Marriages form on the basis of beliefs about ability (since it is not observed) as well earning capacity (which is observed). Beliefs are informed by earning capacity, but crucially also by family background. We show how the intergenerational transmission of ability becomes sensitive to elements of the economic environment once marital sorting is endogenously determined, but also that policy variables (e.g. income redistribution) generally have no impact. The analysis also reveals a novel ‘status motive’ for parental investment and channel through which the fortunes of grandparents and prior generations persist.

Keywords: Family Economics; Inequality; Household Formation; Marriage (search for similar items in EconPapers)
JEL-codes: D10 D19 D31 D80 D83 H31 H52 I24 J11 J12 J18 (search for similar items in EconPapers)
Date: 2018-09
New Economics Papers: this item is included in nep-lab
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