Earnings dynamics and intergenerational transmission of skill

This paper develops and estimates a two-factor model of intergenerational skill transmission when earnings inequality reflects differences in individual skills other non-skill shocks. We consider heterogeneity both initial growth rates, allowing variation to change over the lifecycle. Using administrative tax data on two linked generations Canadians covering 37 years, we exploit covariances log (at different ages) across within identify estimate correlation structure for lifecycle profiles, dynamics low elasticities (IGEs) Canada; however, IGEs are typically 2–3 times larger due considerable (and persistent) conditional skills. Both decline more recent child cohorts lower children born younger fathers. Intergenerational rates explains up 40% children’s variation. Skills become important determinant first part workers’ careers; becomes less as age, because not well-predicted by parental Parents’ equally determinants skills, largely strongly influence Finally, study mobility 35 largest cities Canada, documenting extent which vary with local vs. instability.