Accounting for Individual-Specific Heterogeneity in Intergenerational Income Mobility

Yoosoon Chang (), Steven N. Durlauf (), Bo Hu () and Joon K. Park ()
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Yoosoon Chang: Department of Economics, Indiana University
Steven N. Durlauf: University of Chicago
Bo Hu: Department of Economics, Indiana University
Joon K. Park: Department of Economics, Indiana University

CAEPR Working Papers from Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington

Abstract: This paper proposes a fully nonparametric model to investigate the dynamics of intergenerational income mobility for discrete outcomes. In our model, an individual’s income class probabilities depend on parental income in a manner that accommodates nonlinearities and interactions among various individual and parental characteristics, including race, education, and parental age at childbearing. Consequently, we offer a generalization of Markov chain mobility models. We employ kernel techniques from machine learning and further regularization for estimating this highly flexible model. Utilizing data from the Panel Study of Income Dynamics (PSID), we find that race and parental education play significant roles in determining the influence of parental income on children’s economic prospects.

Keywords: intergenerational income mobility; ordered multinomial probability model; nonparametric estimation; heterogeneous treatment effects; reproducing kernel Hilbert space; effects of parental education (search for similar items in EconPapers)
Pages: 63 pages
Date: 2024-12
New Economics Papers: this item is included in nep-big and nep-lab
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