A meta-regression analysis on the association between income inequality and intergenerational transmission of income Ernesto F. L. Amaral Texas A&M University
[email protected] Sharron X. Wang Texas A&M University
[email protected] Shih-Keng Yen Texas A&M University
[email protected] Francisco Perez-Arce University of Southern California
[email protected] Abstract Our overall aim is to understand the association between income inequality and intergenerational transmission of income (degree to which conditions at birth and childhood determine socioeconomic situation later in life). Causality is hard to establish, because both income inequality and inequality in opportunity are results of complex social and economic outcomes. We analyze whether this correlation is observed across countries and time (as well as within countries), in a context of recent increases in income inequality. We investigate Great Gatsby curves and perform meta-regression analyses based on several papers on this topic. Results suggest that countries with high levels of income inequality tend to have higher levels of inequality of opportunity. Intergenerational income elasticity has stronger associations with Gini coefficient, compared to associations with top one percent income share. Once fixed effects are included for each country and study paper, these correlations lose significance. Increases in income inequality not necessarily bring decreases in intergenerational mobility maybe as a result of different drivers of inequality having diverse effects on mobility, as well as a consequence of public policies that might reduce associations between income inequality and inequality of opportunity. Keywords Income inequality. Intergenerational transmission of income. Intergenerational mobility. Inequality of opportunity. Great Gatsby Curve.