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Income Inequality and Intergenerational Income Mobility in the United States

Authors:
Publication Date:
Jan 2013
Project Programs:
Social Inequality

Is there a relationship between family income inequality and income mobility across generations in the United States? As family income inequality rose in the U.S., parental resources available for improving children’s health, education, and care diverged. The amount and rate of divergence also varied across U.S. states. Researchers and policy analysts have expressed concern that relatively high inequality might be accompanied by relatively low mobility, tightening the connection between individuals’ incomes during childhood and adulthood. Using data from the Panel Study of Income Dynamics, the National Longitudinal Survey of Youth, and various government sources, this paper exploits state and cohort variation to estimate the relationship between inequality and mobility. Results provide very little support for the hypothesis that inequality shapes mobility in the U.S. The inequality to which children were exposed during youth has no robust association with the mobility they experienced as adults. Formal analysis reveals that offsetting effects could underlie this result. In theory, mobility-enhancing forces may counterbalance mobility-reducing effects. In practice, the results suggest that in the U.S. context, the intergenerational transmission of income may not be very responsive to changes in inequality of the size observed since 1970.

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