Intergenerational Earnings Mobility: Mechanism and Measurement

Based on a model of two-stage life cycle, this paper investigates and measures intergerational relationships in lifetime earnings. Using data from PSID, I have found that the lifetime earnings transmission equation is non-linear. The elasticity of a son's lifetime earnings with respect to his father's, which may be loosely regarded as the inverse of intergenerational earnings mobility, is not constant across families. Specifically the relationship between the elasticity and the father's log lifetime earnings is of an inverted U- shape: the elasticity is relatively small at both ends of the spectrum, with the maximum in the middle.