Using Occupation to Measure Intergenerational Mobility

• Author: Miguel Acosta,Bhashkar Mazumder
• DOI: 10.1177/0002716214552056
• Published date: 01 January 2015
• Date: 01 January 2015
• Subject Matter: Section II: Special Topics Relevant to Building a New Infrastructure

174 ANNALS, AAPSS, 657, January 2015

DOI: 10.1177/0002716214552056

Using

Occupation to

Measure Inter-

generational

Mobility

By

BHASHKAR MAZUMDER

and

MIGUEL ACOSTA

552056ANN The Annals of the American AcademyUsing Occupation to Measure Intergenerational Mobility

research-article2014

Scholarly investigations of intergenerational mobility

typically focus on either the occupations of fathers and

sons or their incomes. Using an identical sample of

fathers and sons, we examine how estimates of inter-

generational mobility in income and occupational pres-

tige are affected by (1) measurement that uses long

time averages and (2) varying the point in the life cycle

when outcomes are measured. We find that intergen-

erational occupational mobility is overstated when

using a single year of fathers’ occupation compared to a

10-year average centered on mid-career. We also find

that for both income and occupation, mobility esti-

mates are largest when sons are in their mid-career,

suggesting that this may be the ideal period in which to

measure their status. Finally, we see differences in the

pattern of estimates across the two types of measures:

for income, estimates of intergenerational persistence

are highest when fathers are in their mid-career; for

occupation, estimates are much larger when fathers’

occupations are accounted for late in their careers.

Keywords: intergenerational mobility; social mobility;

occupational mobility; income; occupation

As inequality has risen to the forefront of

policy discussions in the United States, the

discussion has focused not just on the extent to

which outcomes, like income, are unequally

distributed, but also on the extent to which

opportunities to secure those outcomes are

unequally distributed. This has in turn spawned

a great deal of interest in studies of intergen-

Bhashkar Mazumder is a senior economist and research

advisor at the Federal Reserve Bank of Chicago. His

research has been published in the American Economic

Review, Journal of Political Economy, Quantitative

Economics, Journal of Human Resources, and the

Review of Economics and Statistics.

Miguel Acosta is a research assistant at the Board of

Governors of the Federal Reserve System. He has a BA

in economics from Stanford University. In his thesis

research, he used computational linguistics to study

Federal Open Market Committee (FOMC) transpar-

ency and deliberation.

USING OCCUPATION TO MEASURE INTERGENERATIONAL MOBILITY 175

erational mobility because they are typically motivated by concerns regarding

equality of opportunity. The degree to which children’s socioeconomic standing

in society is determined by their parents’ standing in the prior generation may be

indicative of the amount of equality of opportunity that exists in society.

Of course there are many ways to assess intergenerational mobility and many

dimensions of socioeconomic status. Sociologists, who pioneered the study of

intergenerational mobility, have typically focused on measures of occupation,

since occupation conveys important information about social status and is some-

what easier to measure in surveys. Economists, on the other hand, have focused

more attention on measures of income. While income has historically been

harder to measure, with the advent of panel datasets and opportunities for linking

surveys to administrative data sources, economists have made great strides in

using income to measure intergenerational mobility. In particular, studies by

economists have shown that using larger windows of time over which to measure

income, rather than simple snapshots, can have a sizable effect on estimates of

intergenerational mobility. This is because income measured over several years

better captures the concept of “permanent” or “lifetime” income. For example,

Solon (1992) demonstrated that using five-year averages of fathers’ income from

the Panel Study of Income Dynamics (PSID) leads to substantially lower esti-

mates of the degree of intergenerational mobility than using just a single year of

income. Mazumder (2005) shows that even five-year averages may substantially

overstate the degree of intergenerational mobility.

The economics literature has also considered how the age at which the income

of fathers and sons is measured affects estimates of mobility (Grawe 2006; Haider

and Solon 2006). One important finding is that the age at which sons’ income is

measured can be important because it is sometimes the case that sons who even-

tually have a high level of income later in life may have an especially low level of

income early in their career. This “life cycle bias” can lead estimates of intergen-

erational mobility to be high when using a sample comprising younger sons.

Estimates of intergenerational mobility can also be overstated when using the

income of fathers when they are especially young or old. Haider and Solon (2006)

show that these biases are minimized when using income measured around age

40 in both generations.

These measurement concerns are important factors to consider when inter-

preting the recent results from a highly influential study by Chetty et al. (2014)

that documents large spatial differences in intergenerational mobility across the

United States. Chetty et al. use millions of administrative tax records on parents

and children to estimate intergenerational associations in income. Their study is

limited in three ways, however: (1) it uses five-year averages (or less) of parent

income from 1996 to 2000; (2) many parents in their sample may be past their

prime earning years; and (3) children’s income is measured using just two-year

averages when the children are only around the age of 30.1

NOTE: The views expressed here are solely the responsibility of the authors and should not

be interpreted as reflecting the views of the Board of Governors of or any other person associ-

ated with the Federal Reserve System.