Miles Corak - Comments on Jäntti Intergenerational Mobility, Intergenerational Effects

Major messages Theory and measurement Major messages

Practical lessons for measuring equal opportunities comments motivated by Bjorklund and Jantti “Intergenerational mobility, intergenerational effects, sibling correlations, and equality of opportunity�

Miles Corak University of Ottawa Ottawa CANADA Conference on Social Mobility and Inequality in Israel The Israel Museum Jerusalem, 13 June 2017

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

Two conundrums from theory Three practical suggestions

Major messages Two conundrums from theory

1

Theory leads to a statistic—the intergenerational earnings elasticity—that is interesting in its own right, but does not measure Equality of Opportunity or directly inform public policy concerns

2

Theory leads to a definition of “Equality of Opportunity” that cannot be implemented without making a value judgement distinguishing the circumstances for which individuals should be “compensated” from the choices for which they should be “responsible”

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

Two conundrums from theory Three practical suggestions

Major messages Two conundrums from theory

1

Theory leads to a statistic—the intergenerational earnings elasticity—that is interesting in its own right, but does not measure Equality of Opportunity or directly inform public policy concerns

2

Theory leads to a definition of “Equality of Opportunity” that cannot be implemented without making a value judgement distinguishing the circumstances for which individuals should be “compensated” from the choices for which they should be “responsible”

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

Two conundrums from theory Three practical suggestions

Major messages Three practical suggestions

1

Use administrative data to estimate a summary statistic of intergenerational mobility the intergenerational earnings elasticty, which can be thought of as a complement to indicators of cross-sectional inquality like the GINI but more importantly transition matrices which indicate directional mobility

2

Develop measures of absolute mobility, and in particular a poverty line associated with the risk of limited upward mobility

3

Make full use of PISA, and implement a PISA for young children (six year olds?)

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

Two conundrums from theory Three practical suggestions

Major messages Three practical suggestions

1

Use administrative data to estimate a summary statistic of intergenerational mobility the intergenerational earnings elasticty, which can be thought of as a complement to indicators of cross-sectional inquality like the GINI but more importantly transition matrices which indicate directional mobility

2

Develop measures of absolute mobility, and in particular a poverty line associated with the risk of limited upward mobility

3

Make full use of PISA, and implement a PISA for young children (six year olds?)

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

Two conundrums from theory Three practical suggestions

Major messages Three practical suggestions

1

Use administrative data to estimate a summary statistic of intergenerational mobility the intergenerational earnings elasticty, which can be thought of as a complement to indicators of cross-sectional inquality like the GINI but more importantly transition matrices which indicate directional mobility

2

Develop measures of absolute mobility, and in particular a poverty line associated with the risk of limited upward mobility

3

Make full use of PISA, and implement a PISA for young children (six year olds?)

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

Two conundrums from theory Three practical suggestions

Major messages Three practical suggestions

1

Use administrative data to estimate a summary statistic of intergenerational mobility the intergenerational earnings elasticty, which can be thought of as a complement to indicators of cross-sectional inquality like the GINI but more importantly transition matrices which indicate directional mobility

2

Develop measures of absolute mobility, and in particular a poverty line associated with the risk of limited upward mobility

3

Make full use of PISA, and implement a PISA for young children (six year olds?)

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

Two conundrums from theory Three practical suggestions

Major messages Three practical suggestions

1

Use administrative data to estimate a summary statistic of intergenerational mobility the intergenerational earnings elasticty, which can be thought of as a complement to indicators of cross-sectional inquality like the GINI but more importantly transition matrices which indicate directional mobility

2

Develop measures of absolute mobility, and in particular a poverty line associated with the risk of limited upward mobility

3

Make full use of PISA, and implement a PISA for young children (six year olds?)

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

What is intergenerational mobility?

What is Equality of Opportunity?

Galton / Becker and Tomes lead us to focus on the relationship between parent earnings and the adult earnings of children, the Intergenerational Earnings Elasticity

Galton: Regression to the mean in earnings lnYi,t = α + β lnYi,t−1 + εi,t Becker and Tomes: Think of this as a reduced form, with β being an amaglam of structural parameters expressed in percentage terms, and indicating the degree of relative earnings mobility across generations cross-country comparisons are often limited to father - son earnings no sense of absolute differences, or of directional changes (eg the degree or lack of “upward mobility”)

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

What is intergenerational mobility?

What is Equality of Opportunity?

Galton / Becker and Tomes lead us to focus on the relationship between parent earnings and the adult earnings of children, the Intergenerational Earnings Elasticity

Galton: Regression to the mean in earnings lnYi,t = α + β lnYi,t−1 + εi,t Becker and Tomes: Think of this as a reduced form, with β being an amaglam of structural parameters expressed in percentage terms, and indicating the degree of relative earnings mobility across generations cross-country comparisons are often limited to father - son earnings no sense of absolute differences, or of directional changes (eg the degree or lack of “upward mobility”)

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

What is intergenerational mobility?

What is Equality of Opportunity?

Galton / Becker and Tomes lead us to focus on the relationship between parent earnings and the adult earnings of children, the Intergenerational Earnings Elasticity

Galton: Regression to the mean in earnings lnYi,t = α + β lnYi,t−1 + εi,t Becker and Tomes: Think of this as a reduced form, with β being an amaglam of structural parameters expressed in percentage terms, and indicating the degree of relative earnings mobility across generations cross-country comparisons are often limited to father - son earnings no sense of absolute differences, or of directional changes (eg the degree or lack of “upward mobility”)

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

What is intergenerational mobility?

What is Equality of Opportunity?

A fuller descriptive account of mobility is offered by the transition matrix between parent and child ranks in their respective income distributions

A sense of both upward and downward mobility by looking at outcomes for children raised by top and bottom income parents

Source: Chetty, Hendren, Kline, Saez (2014), “Where is the Land of Opportunity?� Quarterly Journal of Economics, Table II, page 1577.

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

What is intergenerational mobility?

What is Equality of Opportunity?

John Roemer suggests Equality of Opportunity means that inequities of outcome are not defensible when they are the result of different “circumstances”

Some inequalities are morally acceptable, while others are not.

To make this distinction we need to know to what degree individuals are responsible for their outcomes in life: to what extent, in other words, are these outcomes the result of circumstances beyond an individual’s control? to what extent do they reflect an individual’s effort?

What “circumstances” should policy makers seek to level?

It is not self-evident, but Roemer suggests that: “where children are concerned, all inequality should be counted as due to circumstances, and none to effort ...”

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

What is intergenerational mobility?

What is Equality of Opportunity?

John Roemer suggests Equality of Opportunity means that inequities of outcome are not defensible when they are the result of different “circumstances”

Some inequalities are morally acceptable, while others are not.

To make this distinction we need to know to what degree individuals are responsible for their outcomes in life: to what extent, in other words, are these outcomes the result of circumstances beyond an individual’s control? to what extent do they reflect an individual’s effort?

What “circumstances” should policy makers seek to level?

It is not self-evident, but Roemer suggests that: “where children are concerned, all inequality should be counted as due to circumstances, and none to effort ...”

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

What is intergenerational mobility?

What is Equality of Opportunity?

John Roemer suggests Equality of Opportunity means that inequities of outcome are not defensible when they are the result of different “circumstances”

Some inequalities are morally acceptable, while others are not.

To make this distinction we need to know to what degree individuals are responsible for their outcomes in life: to what extent, in other words, are these outcomes the result of circumstances beyond an individual’s control? to what extent do they reflect an individual’s effort?

What “circumstances” should policy makers seek to level?

It is not self-evident, but Roemer suggests that: “where children are concerned, all inequality should be counted as due to circumstances, and none to effort ...”

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

What is intergenerational mobility?

What is Equality of Opportunity?

Intergenerational mobility is determined by a host of factors we can’t parse these out by simply looking at the intergenerational earnings elasticity

A recursive model:

β will be a composite of:

lnYt = φ lnYt−1 + γHt + λ Et + υt

(1)

Ht = δ Et + θ lnYt−1 , θ ≥ 0

(2)

Et = α + hEt−1 + νt

(3)

the inheritability of innate endowments or family culture the strength of the causal association between family circumstances and the various components of a child’s human capital the returns to those components of human capital and any direct influence parental status may have on earnings outcomes of children in adulthood, through networks or nepotism

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

What is intergenerational mobility?

What is Equality of Opportunity?

Intergenerational mobility is determined by a host of factors we can’t parse these out by simply looking at the intergenerational earnings elasticity

A recursive model:

β will be a composite of:

lnYt = φ lnYt−1 + γHt + λ Et + υt

(1)

Ht = δ Et + θ lnYt−1 , θ ≥ 0

(2)

Et = α + hEt−1 + νt

(3)

the inheritability of innate endowments or family culture the strength of the causal association between family circumstances and the various components of a child’s human capital the returns to those components of human capital and any direct influence parental status may have on earnings outcomes of children in adulthood, through networks or nepotism

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

What is intergenerational mobility?

What is Equality of Opportunity?

Intergenerational mobility is determined by a host of factors we can’t parse these out by simply looking at the intergenerational earnings elasticity

A recursive model:

β will be a composite of:

lnYt = φ lnYt−1 + γHt + λ Et + υt

(1)

Ht = δ Et + θ lnYt−1 , θ ≥ 0

(2)

Et = α + hEt−1 + νt

(3)

the inheritability of innate endowments or family culture the strength of the causal association between family circumstances and the various components of a child’s human capital the returns to those components of human capital and any direct influence parental status may have on earnings outcomes of children in adulthood, through networks or nepotism

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

What is intergenerational mobility?

What is Equality of Opportunity?

Intergenerational mobility is determined by a host of factors we can’t parse these out by simply looking at the intergenerational earnings elasticity

A recursive model:

β will be a composite of:

lnYt = φ lnYt−1 + γHt + λ Et + υt

(1)

Ht = δ Et + θ lnYt−1 , θ ≥ 0

(2)

Et = α + hEt−1 + νt

(3)

the inheritability of innate endowments or family culture the strength of the causal association between family circumstances and the various components of a child’s human capital the returns to those components of human capital and any direct influence parental status may have on earnings outcomes of children in adulthood, through networks or nepotism

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

What is intergenerational mobility?

What is Equality of Opportunity?

Intergenerational mobility is determined by a host of factors we can’t parse these out by simply looking at the intergenerational earnings elasticity

A recursive model:

β will be a composite of:

lnYt = φ lnYt−1 + γHt + λ Et + υt

(1)

Ht = δ Et + θ lnYt−1 , θ ≥ 0

(2)

Et = α + hEt−1 + νt

(3)

the inheritability of innate endowments or family culture the strength of the causal association between family circumstances and the various components of a child’s human capital the returns to those components of human capital and any direct influence parental status may have on earnings outcomes of children in adulthood, through networks or nepotism

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

What is intergenerational mobility?

What is Equality of Opportunity?

Intergenerational mobility is determined by a host of factors we can’t parse these out by simply looking at the intergenerational earnings elasticity

A recursive model:

β will be a composite of:

lnYt = φ lnYt−1 + γHt + λ Et + υt

(1)

Ht = δ Et + θ lnYt−1 , θ ≥ 0

(2)

Et = α + hEt−1 + νt

(3)

the inheritability of innate endowments or family culture the strength of the causal association between family circumstances and the various components of a child’s human capital the returns to those components of human capital and any direct influence parental status may have on earnings outcomes of children in adulthood, through networks or nepotism

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

What is intergenerational mobility?

What is Equality of Opportunity?

Intergenerational mobility is determined by a host of factors we can’t parse these out by simply looking at the intergenerational earnings elasticity

A recursive model:

β will be a composite of:

lnYt = φ lnYt−1 + γHt + λ Et + υt

(1)

Ht = δ Et + θ lnYt−1 , θ ≥ 0

(2)

Et = α + hEt−1 + νt

(3)

the inheritability of innate endowments or family culture the strength of the causal association between family circumstances and the various components of a child’s human capital the returns to those components of human capital and any direct influence parental status may have on earnings outcomes of children in adulthood, through networks or nepotism

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

What is intergenerational mobility?

What is Equality of Opportunity?

Focus on intermediate processes parental education as a circumstance, child education (or competencies) as an outcome

1

I’m hard-pressed to imagine a program that has had more public policy impact than PISA

2

Framing PISA outcomes through Roemer’s methods asks us to look at the cummulative distribution function of child outcomes according to parental background An example using 14 year old US children An example using 5 year old and 14 year old US children

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

What is intergenerational mobility?

What is Equality of Opportunity?

Focus on intermediate processes parental education as a circumstance, child education (or competencies) as an outcome

1

I’m hard-pressed to imagine a program that has had more public policy impact than PISA

2

Framing PISA outcomes through Roemer’s methods asks us to look at the cummulative distribution function of child outcomes according to parental background An example using 14 year old US children An example using 5 year old and 14 year old US children

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

What is intergenerational mobility?

What is Equality of Opportunity?

Focus on intermediate processes parental education as a circumstance, child education (or competencies) as an outcome

1

I’m hard-pressed to imagine a program that has had more public policy impact than PISA

2

Framing PISA outcomes through Roemer’s methods asks us to look at the cummulative distribution function of child outcomes according to parental background An example using 14 year old US children An example using 5 year old and 14 year old US children

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

What is intergenerational mobility?

What is Equality of Opportunity?

Focus on intermediate processes parental education as a circumstance, child education (or competencies) as an outcome

1

I’m hard-pressed to imagine a program that has had more public policy impact than PISA

2

Framing PISA outcomes through Roemer’s methods asks us to look at the cummulative distribution function of child outcomes according to parental background An example using 14 year old US children An example using 5 year old and 14 year old US children

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

What is intergenerational mobility?

What is Equality of Opportunity?

Proficiency in mathematics among 14 year olds is much higher for children with more educated parents

Percentage of 14 year olds achieving proficiency

100

Multiplication and division Place value

Rate and measurement

80

60

Fractions

40 Area and volume

20

0

Having a parent with ... High education

Medium education

Low education

Source: Bradbury, Corak, Waldfogel, Washbrook, Too Many Children Left Behind. New York: Russell Sage Foundation MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

What is intergenerational mobility?

What is Equality of Opportunity?

Equality of opportunity suggests an empirical framework cummulative distribution function of math proficiency scores of 14 year olds

100

Parent's Education High Medium Low

The percentage share of children

80

60

40

20

0 very low

average

very high

Proficiency increases

Source: Bradbury, Corak, Waldfogel, Washbrook, Too Many Children Left Behind. New York: Russell Sage Foundation MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

What is intergenerational mobility?

What is Equality of Opportunity?

Equality of opportunity suggests an empirical framework cummulative distribution function of math proficiency scores of 5 and 14 year olds

100

Parent's Education High Medium Low

Test Grade 8 Kindergarten

The percentage share of children

80

60

40

20

0 very low

average

very high

Proficiency increases

Source: Bradbury, Corak, Waldfogel, Washbrook, Too Many Children Left Behind. New York: Russell Sage Foundation MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

Two conundrums from theory Three practical suggestions

Major messages Two conundrums from theory

1

Theory leads to a statistic—the intergenerational earnings elasticity—that is interesting in its own right, but does not measure Equality of Opportunity or directly inform public policy concerns

2

Theory leads to a definition of “Equality of Opportunity” that cannot be implemented without making a value judgement distinguishing the circumstances for which individuals should be “compensated” from the choices for which they should be “responsible”

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

Two conundrums from theory Three practical suggestions

Major messages Two conundrums from theory

1

Theory leads to a statistic—the intergenerational earnings elasticity—that is interesting in its own right, but does not measure Equality of Opportunity or directly inform public policy concerns

2

Theory leads to a definition of “Equality of Opportunity” that cannot be implemented without making a value judgement distinguishing the circumstances for which individuals should be “compensated” from the choices for which they should be “responsible”

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

Two conundrums from theory Three practical suggestions

Major messages Three practical suggestions

1

Use administrative data to estimate a summary statistic of intergenerational mobility the intergenerational earnings elasticty, which can be thought of as a complement to indicators of cross-sectional inquality like the GINI but more importantly transition matrices, which indicate directional mobility

2

Develop measures of absolute mobility, and in particular a poverty line associated with the risk of limited upward mobility

3

Make full use of PISA, and implement a PISA for young children (six year olds?)

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

Two conundrums from theory Three practical suggestions

Major messages Three practical suggestions

1

Use administrative data to estimate a summary statistic of intergenerational mobility the intergenerational earnings elasticty, which can be thought of as a complement to indicators of cross-sectional inquality like the GINI but more importantly transition matrices, which indicate directional mobility

2

Develop measures of absolute mobility, and in particular a poverty line associated with the risk of limited upward mobility

3

Make full use of PISA, and implement a PISA for young children (six year olds?)

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

Two conundrums from theory Three practical suggestions

Major messages Three practical suggestions

1

Use administrative data to estimate a summary statistic of intergenerational mobility the intergenerational earnings elasticty, which can be thought of as a complement to indicators of cross-sectional inquality like the GINI but more importantly transition matrices, which indicate directional mobility

2

Develop measures of absolute mobility, and in particular a poverty line associated with the risk of limited upward mobility

3

Make full use of PISA, and implement a PISA for young children (six year olds?)

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

Two conundrums from theory Three practical suggestions

Major messages Three practical suggestions

1

Use administrative data to estimate a summary statistic of intergenerational mobility the intergenerational earnings elasticty, which can be thought of as a complement to indicators of cross-sectional inquality like the GINI but more importantly transition matrices, which indicate directional mobility

2

Develop measures of absolute mobility, and in particular a poverty line associated with the risk of limited upward mobility

3

Make full use of PISA, and implement a PISA for young children (six year olds?)

MilesCorak.com

@MilesCorak

Practical lessons

Major messages Theory and measurement Major messages

Two conundrums from theory Three practical suggestions

Major messages Three practical suggestions

1

Use administrative data to estimate a summary statistic of intergenerational mobility the intergenerational earnings elasticty, which can be thought of as a complement to indicators of cross-sectional inquality like the GINI but more importantly transition matrices, which indicate directional mobility

2

Develop measures of absolute mobility, and in particular a poverty line associated with the risk of limited upward mobility

3

Make full use of PISA, and implement a PISA for young children (six year olds?)

MilesCorak.com

@MilesCorak

Practical lessons