A Comparison of Intergenerational Mobility Curves in Germany, Norway, Sweden, and the US

• Author: Kjell Vaage,Espen Bratberg,Daniel D. Schnitzlein,Martin Nybom,Bhashkar Mazumder,Jonathan Davis
• DOI: http://doi.org/10.1111/sjoe.12197
• Published date: 01 January 2017
• Date: 01 January 2017

Scand. J. of Economics 119(1), 72–101, 2017

DOI: 10.1111/sjoe.12197

A Comparison of Intergenerational

Mobility Curves in Germany, Norway,

Sweden, and the US∗

Espen Bratberg

University of Bergen, NO-5007 Bergen, Norway

espen.bratberg@econ.uib.no

Jonathan Davis

Harris School of Public Policy, Chicago, IL 60637, USA

jonmvdavis@gmail.com

Bhashkar Mazumder

Federal Reserve Bank of Chicago, Chicago, IL 60604, USA

bhash.mazumder@gmail.com

Martin Nybom

SOFI, SE-10691 Stockholm, Sweden

martin.nybom@sofi.su.se

Daniel D. Schnitzlein

Leibniz University Hannover, DE-30167 Hannover, Germany

schnitzlein@aoek.uni-hannover.de

Kjell Vaage

University of Bergen, NO-5007 Bergen, Norway

kjell.vaage@econ.uib.no

Abstract

We examine intergenerational mobility differences between Germany, Norway, Sweden, and

the US. Using ranks, we find that the US is substantially less intergenerationally mobile

than the three European countries and that the most mobile region of the US is less mobile

than the least mobile regions of Norway and Sweden. Using a linear estimator of income

share mobility, we find that the four countries have very similar rates of intergenerational

mobility. However, when we use non-parametric versions of rank and income share mobility,

we find that the US tends to experience lower upward mobility at the bottom of the income

distribution than Norway and Sweden.

Keywords: Intergenerational mobility; inequality

JEL classification:D63; J62

∗We thank participants at the Human Capital and Economic Opportunity workshop on social

mobility and anonymous reviewers for helpful comments. The views expressed here do not

reflect those of the Federal Reserve Bank of Chicago or the Federal Reserve system.

CThe editors of The Scandinavian Journal of Economics 2016.

E. Bratberg et al. 73

I. Introduction

Intergenerational mobility has risen to prominence among policymakers in

many countries. In the US, President Barack Obama has described growing

inequality and lack of upward mobility as the “defining challenge of our

time”. In the UK, intergenerational mobility is such a salient issue that the

government has been tracking indicators of social mobility in recent years.

The OECD is now examining social mobility as one important measure in

its Measurement of Economic Performance and Social Progress program.

Given the growing worldwide importance of intergenerational mobility to

policymakers, one would imagine that an important priority would be to

document differences in rates of intergenerational mobility across countries.

Establishing a sound body of descriptive facts concerning cross-country

differences in intergenerational mobility might yield fruitful insights into

understanding the sources of intergenerational persistence in any given

society.

Thus far, however, most existing evidence on cross-country differences

in intergenerational mobility has focused on one particular measure, the

intergenerational elasticity (IGE) in income.1For example, the oft-cited

“Great Gatsby” curve plots the IGE against the Gini coefficient for a sam-

ple of countries.2While the IGE is a useful summary measure of relative

intergenerational mobility that requires just one parameter, it has some

limitations. For example, it is not informative about differences between

upward and downward mobility or how mobility differs at different points

in the income distribution. Also, it does not tell us anything about absolute

intergenerational income mobility.

We use a new methodological approach that addresses these concerns.

Specifically, we measure intergenerational mobility curves using a variant

of the framework developed by Aaberge and Mogstad (2014) who ana-

lyze cross-country differences in intra-generational mobility. Aaberge and

Mogstad measure mobility using the difference between two Lorenz curves:

the true Lorenz curve, corresponding to the realized permanent income

distribution, and a “reference” Lorenz curve, which measures the counter-

factual permanent income distribution if there were no intra-generational

income mobility. The difference between the curves describes the additional

share of total income obtained at each percentile of the initial distribution

due to income mobility over time. The use of the Lorenz curve unifies the

study of economic mobility with the large body of literature on inequality

1An exception is Corak et al. (2014), who use measures of directional rank mobility.

2See Corak et al. (2014). The curve shows that countries with higher levels of inequality

also have higher levels of intergenerational persistence, or lower mobility. The relationship

was first shown by Corak (2006) and the expression, the Great Gatsby curve, was coined by

Alan Krueger.

CThe editors of The Scandinavian Journal of Economics 2016.