Daniel Felsenstein Comments on Geography of Intergenerational Income Mobility

Geography of Intergenerational Income Mobility

Daniel Felsenstein Hebrew University of Jerusalem

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1. Conception of ‘Geography’ • Springboard for transmitting intergenerational life chances • One of many ‘initial conditions’ (like parent’s income) • Geography is all about origins –not destinations • What about spatial issues ?: size- rank size distribution; big cities have urban wage premia scale- great diversity is scale of units; high costs of moving spatial configuration - spatial skewness role of neighbors- spatial clustering and autocorrelation 2

Measurement Issues • 8 measures of intergenerational mobility • Income mobility, rank mobility, directional mobility (3 scenarios) • Income and rank mobilities are charted; directional mobility is mapped • Homogenized into 2 clusters: ‘us and them’ • β popular measure of mobility, but others: – – – –

β: regression to the mean, relative mobility, rate of mobility rank mobility: absolute mobility σ or Gini: inequality increasing/decreasing levelling up/down 3

• Little attention to changing rank.

• Distinguish between mobility in earnings mobility in rank distribution • Relating mobility to inequality, estimate beta from a Gini regression of Yrt on Yrt-1:

cov(Yrt Rrt 1 ) t  cov(Yrt 1 Rrt 1 )

Beta decomposition : paradigm for measuring inequality and integrating 4 measures of mobility 4

• Decomposition of  (Wodon and Yitzhaki)

G t Yt  t  tt 1 G t 1 Yt 1  t·t-1 =

Gini correlation between Y in time t and income rank in t-1

 (mean reversion, relative mobility) decomposed into:  = absolute mobility •Gt/Gt-1 =  mobility •Yt/Yt-1 = leveling

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Decomposition of Beta Dynamics of regional income inequality, 9 Israeli regions, 1991-2001 2 1.8

Beta Decomposition Values

1.6 1.4

Y2/Y1 G2/G1 immobility mean revers ion

1.2 1 0.8 0.6 0.4 0.2 0 76-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 Year

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• Regional convergence 1976-91, regional sclerosis thereafter but punctuated by shocks • ‘Shocks’ of 1995/6 and 1999/2001; economic growth induces regional inequality • Recession post 2000 and reversal of trends?

• Earnings and labor markets induce regional inequality, housing markets induce equality 7