Scandinavian Working Papers in Economics

Research Papers in Economics,
Stockholm University, Department of Economics

No 2009:19: Rich Dad, Smart Dad: Decomposing the Intergenerational Transmission of Income

Lars Lefgren (), Matthew Lindquist () and David Sims ()
Additional contact information
Lars Lefgren: Brigham Young University, Postal: Department of Economics , Brigham Young University , 130 Faculty Office Building , Provo, UT 84602-2363, USA,
Matthew Lindquist: Dept. of Economics, Stockholm University, Postal: Department of Economics, Stockholm University, S-106 91 Stockholm, Sweden
David Sims: Brigham Young University, Postal: Department of Economics , Brigham Young University , 130 Faculty Office Building , Provo, UT 84602-2363, USA

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

JEL-codes: J62

41 pages, December 10, 2009

Full text files

wp09_19.pdf PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Sten Nyberg ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-01-23 23:38:25.