Intergenerational income immobility in Finland: Contrasting roles for parental earnings and family income

An intergenerational model is developed, nesting heritable earning abilities and credit constraints limiting human capital investments in children. Estimates on a large, Finnish data panel indicate very low transmission from parental earnings, suggesting that the parameter of inherited earning abili...

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Bibliographic Details
Published in:Journal of population economics 2013-07, Vol.26 (3), p.1057-1094
Main Authors: Lucas, Robert E. B, Pekkala, Sari
Format: Article
Language:English
Subjects:
Age
Auswirkung
Bildung
Bildungsertrag
Children
Children & youth
Daughters
Demography
Earned income
Earnings
Economics
Economics and Finance
Education
Einkommenseffekt
Einkommenshöhe
Eltern
Familieneinkommen
Families & family life
Family income
Fathers
Finland
Finnland
Generationenbeziehung
HOUSEHOLD
Human capital
Hypotheses
Income
Income estimates
Influence
Intergenerational relationships
Investition
Kind
Labor Economics
Liquidity
Mobilität
Mothers
Nesting
Original Paper
Panel data
Parents
Parents & parenting
Population Economics
Preferences
School age children
Social Policy
Sohn
Sons
Soziale Mobilität
Tochter
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Description
Summary:An intergenerational model is developed, nesting heritable earning abilities and credit constraints limiting human capital investments in children. Estimates on a large, Finnish data panel indicate very low transmission from parental earnings, suggesting that the parameter of inherited earning ability is tiny. Family income, particularly during the phase of educating children, is shown to be much more important in shaping children's lifetime earnings. This influence of parental incomes on children's earnings rises as the children age because the returns to education rise. Despite Finland's well-developed welfare state, persistence in economic status across generations is much higher than previously thought.
ISSN:0176-1714
0933-1433
1432-1475
1432-1475
DOI:10.1007/s00148-012-0442-8