Michael Beenstock Comments on Intergenerational Income Mobility in Israel

Intergenerational Mobility & Inequality: Comments on Oren Heller Michael Beenstock Hebrew University of Jerusalem

Dynamics of Intergenerational Inequality Yc    Y p  uc uc  u p   c int ergenerati onal autocorrel ation

        2 Yc

2 Yp

2

2 up

2 c

   (  2 ) 1   2 2  Y*    steady state 2 2 (1   )(1   )(1   )

Consistency of βols p lim ˆols    p lim

cov(u p y p ) var( y p )



cov(u p y p )  var(u p )   cov(u p y g ) ˆols

yc     y p   uˆ p   c y p  X p  u p

generated regressor

Selection bias induced by yc = 0 & yp > 0 Also yc > 0* & yp = 0 yc    zc  w

yc  0 if y  0 * c

prob ( yc  0)   (  zc )

  yc     y p   uc  uc    corr (uc w)

Gini & Sigma Convergence Gc  Yp  G p cp Yc cp 

cov(Yc R p ) cov(Yc Rc )

relative immobility

 absolute immobility c    p rcp

Intergenerational Dynamics: Israel (Matched Census 1983-1995) Correlation

Gini Mobility

Schoolyears

0.32

0.63

Earnings

0.04

0.88

Permanent earnings

0.28 (Solon)

0.79

Sibling Correlations (Census 1995) schooling

earnings

Brother sister

0.435

0.221

brothers

0.417

0.304

sisters

0.561

0.165

Sibling Correlation rs  b  (1  b)r

2 cp

2 b 2 2 (1   ) yc     y p  y s   c

ˆ schooling  0.308 ˆ earnings  0.103

Education & Income: Very weak intergenerational transmission of Ep to Yc log Yc     log Yp  Ec   log Ec     log E p  v var(log Yc )   2 var( Ec )   2 var(log Y p )   2 var(log Ec )   2 var(log E p )   v2 var( Ec )  {exp[var(log Ec )]  1}[ E ( Ec )]2

  0.1   0.25   0.35

Conclusions • Intergenerational transmission of inequality is weak due to high mobility • Especially in Israel • “Tabula Rasa”: Locke • Inequality induced by family: Rousseau • Larger families have more sibling interaction: induces inequality • Focus on lowest and highest deciles?