Research Papers in Economics, Department of Economics, Stockholm University
No 2009:19:
Rich Dad, Smart Dad: Decomposing the Intergenerational Transmission of Income
Lars Lefgren ()
, Matthew Lindquist ()
and David Sims ()
Abstract: We construct a simple model, consistent with Becker and
Tomes (1979), that decomposes the intergenerational income elasticity into
the causal effect of financial resources, the mechanistic transmission of
human capital, and the role that human capital plays in the determination
of father’s permanent income. We show how a particular set of instrumental
variables could separately identify the money and human capital
transmission effects. We further outline two instrumental variables methods
for bounding the structural parameters of our model in the presence of
imperfect instruments. Using data from a thirty-five percent sample of
Swedish sons and their fathers, we show that only a minority of the
intergenerational income elasticity can be plausibly attributed to the
causal effect of fathers’ financial resources.
Keywords: financial resources; human capital; intergenerational income elasticity; intergenerational mobility; permanent income; (follow links to similar papers)
JEL-Codes: J62; (follow links to similar papers)
41 pages, December 10, 2009
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