Estimating Intergenerational Persistence of Lifetime Earnings with Life Course Matching: Evidence from PSID.

Area of Science:

• Economics
• Sociology
• Family Studies

Background:

• Estimates of intergenerational earnings persistence in the U.S. exhibit significant variation.
• Life-cycle bias is a potential explanation for these discrepancies in research findings.

Purpose of the Study:

• To estimate the intergenerational correlation in lifetime earnings.
• To account for life-cycle bias in earnings persistence estimations.

Main Methods:

• Utilizing data on fathers' and sons' earnings.
• Measuring earnings at similar age ranges (35-44 and 45-54) for both generations.
• Calculating the intergenerational correlation coefficient.

Main Results:

• The intergenerational correlation in lifetime earnings was estimated.
• Earnings persistence estimates were consistent when comparing fathers and sons aged 35-44 versus those aged 45-54.
• This suggests that life-cycle bias may not significantly alter the core findings of earnings persistence.

Conclusions:

• Life-cycle bias may not be the primary driver of the wide variation in estimated intergenerational earnings persistence.
• The study provides a more robust estimate of earnings persistence by controlling for age-related earnings profiles.
• Further research could explore other factors contributing to the variability in intergenerational economic mobility.