On the Intergenerational Transmission of Economic Status
نویسندگان
چکیده
We present a model of human capital investment within and across generations, with incomplete markets and government transfer programs. Our model combines a fairly standard life-cycle model of human capital with an intergenerational model à la Becker and Tomes (1986). The human capital technology features multiple stages of investment during childhood, a college decision, and on-the-job accumulation. The model can jointly explain a wide range of intergenerational relationships, such as the intergenerational elasticities (IGE) of lifetime earnings, education, poverty and wealth, while remaining empirically consistent with cross-sectional inequality. Unlike previous models, intergenerationally constrained families have similar IGE’s as the unconstrained families. Exogenous ability transmission has a modest impact on the IGE in partial equilibrium, but this effect disappears in general equilibrium. On the other hand, investment in children and parents’ human capital have a large impact on the equilibrium IGE. Education subsidies and progressive taxation can significantly reduce the persistence in economic status across generations. ∗Email: [email protected] and [email protected], respectively. We are very grateful for constructive comments by Gary Becker, Steven Durlauf, Arthur Goldberger, John Knowles, Nicolas Schutz, Chris Taber, seminar participants at the 2012 MIE conference, the 2012 Vienna Macro Workshop, the University of Mannheim, and the University of Chicago. We also thank James Heckman and four anonymous referees for their detailed suggestions. All remaining errors are our own.
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