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Transmission channels of intergenerational income mobility: Empirical evidence from Germany and the Unites States

Mustafa Coban and Sarah Sauerhammer

No 138, Discussion Paper Series from Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy

Abstract: Relying on harmonized individual data for Germany and the United States, we perform a country comparison regarding the underlying mechanisms of the intergenerational income mobility. By applying descriptive and structural decomposition methods, we estimate the relative importance of the transmission of financial resources and endowments within a family. Although the results from both approaches are similar, the structural decompositions rather allow a causal interpretation due to instrumenting the transmission channels. Whereas a family's financial resources and endowments almost equally contribute to the intergenerational income mobility in Germany, endowments account for solely 30 percent in the United States. Nonlinearities in the transmission channels along the income distribution in the United States indicate that the endowment effect slightly decreases in relative importance across income percentiles. In Germany, there are no significant nonlinearities at all.

Keywords: intergenerational income elasticity; intergenerational mobility; financial resources; human capital (search for similar items in EconPapers)
JEL-codes: I24 J24 J62 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur
Date: 2017
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