Australian sociologists have a long history of work onÂ intergenerational mobility, but economists have come late to the party. Nonetheless, we have our own particular toolkit, which considers the questions somewhat differently from sociologists. I’ve just had a paper published in the Berkeley Electronic Press economics journals which, so far as I’m aware, is the first paper to estimate what economists call the ‘intergenerational earnings elasticity’ for fathers and sons. Here’s the gist of it:
Intergenerational Mobility in Australia, Berkeley Electronic Press: Contributions in Economic Analysis and Policy
Combining four surveys conducted over a forty year period, I calculate intergenerational earnings elasticities for Australia, using predicted earnings in parentsâ€™ occupations as a proxy for actual parental earnings. In the most recent survey, the elasticity of sonsâ€™ wages with respect to fathersâ€™ wages is around 0.2. Comparing this estimate with earlier surveys, I find little evidence that intergenerational mobility in Australia has significantly risen or fallen over time. Applying the same methodology to United States data, I find that Australian society exhibits more intergenerational mobility than the United States. My method appears to slightly overstate the degree of intergenerational mobility; if the true intergenerational earnings elasticity in the United States is 0.4â€“0.6 (as recent studies have suggested), then the intergenerational earnings elasticity in Australia is probably around 0.2â€“0.3.
Note that the finding that Australia is moreÂ socially mobile than the United States (and probably less socially mobile than Scandinavia) accords with an earlier paper of mine withÂ Dan Andrews, which found thatÂ more equal countries tend to also be more socially mobile.Â In other words, it’s easier to move from rags to riches in a more equal country.
More broadly, the advantage of looking at the intergenerational elasticity is that it’s a summary measure that facilitates comparisons across countries. But without the work of great ANU sociologists Leonard Broom and Frank Jones (now at UQ), who ran some innovative surveys in the 1960s and 1970s, it would not have been possible to look at how intergenerational mobility has changed across time in Australia. So I’m greatly in their debt.
As you’ll see if you read the paper, getting good measures of intergenerational mobility is pretty data-intensive, requiring long panels of earnings data for fathers and sons. As Australia’s HILDA survey runs onÂ over the next decade or two, we’ll hopefully get more precise estimates of how hard it is to move from rags to riches in Australia. And while my study can only look at blokes (because of lower labour force participation rates for women), it will eventually be possible to get good estimates for mothers and daughters too.
Update: Andrew Norton’s blog has a characteristically thoughtful post, which has provoked an interesting comment thread.