On the Intergenerational Transmission of Economic Status

Lee, Tim and Seshadri, Ananth (2018) On the Intergenerational Transmission of Economic Status. Journal of Political Economy. (In Press)

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Official URL: http://tse-fr.eu/pub/32077

Abstract

We present a model in which human capital investments occur over the life-cycle and across generations, à la Becker and Tomes (1986), also featuring incomplete markets and government transfer programs. 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, college attainment and wealth, while remaining empirically consistent with cross-sectional inequality. Much of life-cycle inequality is determined early in life, which in turn is explained in large part by parental background. The model implies that this is mainly due to early investments in children made by young parents, so life-cycle constraints these parents face are important for understanding the persistence of economic status across generations. Education subsidies, especially early on, can significantly reduce the intergenerational persistence of economic status.

Item Type: Article
Language: English
Date: 2018
Refereed: Yes
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 16 May 2018 13:47
Last Modified: 16 May 2018 13:47
OAI ID: oai:tse-fr.eu:32077
URI: http://publications.ut-capitole.fr/id/eprint/25704

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