A family investment model for intergenerational elasticity

Simon M.S. Lo

Journal of Economic Behavior & Organization, 2025, vol. 238, issue C

Abstract: We use a family investment model to explain intergenerational income elasticity (IGE) through three transmission channels: parents’ financial investments, human capital, and family backgrounds. We distinguish between shareable (public) and non-shareable (private) financial resources, of which the relative roles change with children’s gender. Removing the indirect effects caused by parents’ human capital significantly reduces the actual IGE from 0.32 to 0.20, indicating weak intergenerational income persistence. New findings are obtained regarding the externality of family size, substitutability of parents’ human capital, relative roles of fathers’ and mothers’ human capital, and assortative mating in the IGE.

Keywords: Intergenerational income elasticity; Family investment model; Human capital; Family size; Shareable and non-shareable resources; Assortative mating (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:238:y:2025:i:c:s0167268125003324

DOI: 10.1016/j.jebo.2025.107213

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