Quantifying the Role of Firms in Intergenerational Mobility

Caue Dobbin and Tom Zohar

No 10758, CESifo Working Paper Series from CESifo

Abstract: We investigate the role of firms in intergenerational mobility by decomposing the intergenerational elasticity of earnings (IGE) into firm-IGE and individual-IGE using a two-way fixed effects framework. Using data from Israel, we find that the firm component is responsible for 22% of the overall IGE. We then explore potential mechanisms and find that education differences explain a large share of the individual-IGE, while place of residence and demographics are more important for the firm-IGE. Guided by these empirical patterns, we develop a novel method to estimate the role of skill-based sorting and find that it accounts for approximately half of the firm-IGE. Our results provide evidence that the intergenerational transmission of earnings encompasses more than just human capital, and highlight the importance of promoting equal access to high-paying firms and reducing labor market segregation in efforts to enhance equality of opportunity.

Keywords: intergenerational mobility; firm wage premium; assortative matching; skill-based sorting (search for similar items in EconPapers)
JEL-codes: J31 J60 J62 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-bec and nep-lab
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10758

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