Spillover Bias in Multigenerational Income Regressions

Jørgen Modalsli and Kelly Vosters

Journal of Human Resources, 2024, vol. 59, issue 3, 743-776

Abstract: A growing literature studies long-term income persistence across more than two generations. Despite a rich understanding of measurement-related biases for the parent–child model, far less is known for the multigenerational model that captures transmission from parents and grandparents. We show that even using a 25-year income average can result in a spurious grandparent coefficient. Importantly, for a given parental measure, averaging over more years for grandparents increases spillover bias. We propose an instrumental variables (IV) approach that can more effectively mitigate bias with shorter time spans of income. With Norwegian administrative data, we reveal a positive spillover bias in the grandfather coefficients.

JEL-codes: C30 J62 (search for similar items in EconPapers)
Date: 2024
Note: DOI: https://doi.org/10.3368/jhr.0520-10919R2
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Related works:
Working Paper: Spillover bias in multigenerational income regressions (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:uwp:jhriss:v:59:y:2024:i:3:p:743-776

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