Has the Intergenerational Transmission of Economic Status Changed?

The elasticity of children’s economic status with respect to parents’ economic status is often taken as an indicator of the extent of equality of opportunity. While many studies have estimated the elasticity for the United States and other countries, only a few have tried to estimate the trend in the elasticity. These studies produce conflicting results. When we use the Panel Study of Income Dynamics to estimate the trend in the elasticity of son’s income with respect to parental income, we find no statistically significant trend in the elasticity for sons born between 1949 and 1965. However, our evidence suggests a non-linear trend in which the elasticity increased for sons born between 1949 and 1953, then declined for sons born after that. Thus depending on the time periods one chooses to compare, the trend could be upward, downward or flat. This and other factors help account for different estimates of the trend in economic mobility across studies.