Oren Heller Intergenerational Income Mobility in Israel

Intergenerational Income Mobility in Israel Oren Heller National Insurance Institute of Israel Hebrew University of Jerusalem 15.6.2017

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Intergenerational Mobility in Israel

Oren Heller – orenh@nioi.gov.il

Main Objectives & Contributions • One of the first papers to explore intergenerational mobility in Israel by the

use of administrative data • Measure earnings mobility in Israel • Include Israel to cross-country comparisons • Address variation across population groups and address patterns regarding

intergenerational mobility in Israel • Introducing factors affecting intergenerational mobility which haven’t been

explored yet, by exploiting traits unique to Israel

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Oren Heller – orenh@nioi.gov.il

Intergenerational Mobility in Israel

Cross-Country Comparison Great Gatsby Curve 0.8 0.7

0.67

0.6

0.6

0.5

0.46

IGE 0.4 0.3

0 20.0

0.46

0.41 0.34

0.26

0.18 0.17

0.5

0.58

0.47

0.4

0.32 0.27

0.2 0.1

0.5

0.29

0.52

0.49 0.44

0.32

0.19

0.15

25.0

30.0

35.0

40.0

45.0

50.0

55.0

60.0

65.0

Gini Apart from Israel, IGE estimates are from Corak (2016). Gini coefficients are the averages values of households’ disposable income Gini coefficients which are available between the years 1997-2001 as published by the World Bank.

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Intergenerational Mobility in Israel

IGE Results

Local-linear estimation; triangle kernel; bw: 1.5

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Intergenerational Mobility in Israel

Methods •

•

Log-log; IGE

•

Rank-Rank

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Intergenerational Mobility in Israel

Outline • Literature • Data • IGE: method, sample & basic results • Rank-rank: method, sample • Cross-sectional analysis: Ethnicity; Immigration • Summary & conclusions

Oren Heller – orenh@nioi.gov.il

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Intergenerational Mobility in Israel

Oren Heller – orenh@nioi.gov.il

Literature

Estimation & Comparison IGE • Children’s and parents’ log-earnings. For comparability: sons-fathers • Bjorklund and Jantti (1997), Couch and Dunn (1977), Solon (1999, 2002)

and Corak (2004, 2016) conduct cross-country IGE comparisons.

• Following guidelines suggested by Grawe (2004)

Rank • Children’s and parents’ earnings ranked within distributions • Dahl and DeLeire (2008) and Chetty et al. (2014)

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Intergenerational Mobility in Israel

Oren Heller – orenh@nioi.gov.il

Literature Israel

• Aloni & Krill (2017) – MOF working paper based on

administrative data • IGE=0.166 -> 0.253 after adjustments • Results regarding gender, ethnicity and family’s origins are consistent

with ours.

• 20% higher mobility among immigrants.

• Beenstock (2008) measures intergenerational correlation of

around 0.04 and Frish & Zussman (2009) intergenerational income elasticity of 0.15-0.26 among the Jewish population.

Both use Census data (1983 + 1995)

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Intergenerational Mobility in Israel

Oren Heller – orenh@nioi.gov.il

Data • Population registry records (Ministry of Interior) allow to match

children and parents.

• And include demographic info: gender, birth date, religion, birth

country and registered address

• Earnings from Tax Authority: Salaries (1986-2015) and self-

employment income (1998-2014)

• Education: Matriculation exams (Bagrut) info (1998-2002;

Ministry of Education) & college attendance (1995-2015; NII)

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Intergenerational Mobility in Israel

Oren Heller – orenh@nioi.gov.il

IGE Sample Definition • 1975 birth cohort and their fathers ~ 44k pairs • Child earnings while 35 to 39 years old (2010-2014) • Father earnings while children are 11 to 20 years old (1986-1995;

fathers are 41-50 on average).

• Old and young fathers are omitted: restricted to 23-42 years gap • Earnings are inflated and averaged over time • Earnings consist of • For children: paid salary plus self-employment income • For fathers: paid salary

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Intergenerational Mobility in Israel

Results - IGE Â IGE Observations R-squared

Total

Males

Females

0.276 (0.00505)

0.318 (0.00653)

0.251 (0.00715)

43,774 0.064

22,901 0.094

20,873 0.056

Robustness tests: Lifecycle; Attenuation; Self-employment exclusion

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Intergenerational Mobility in Israel

Rank-Rank Estimations

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Intergenerational Mobility in Israel

Rank Sample Definition • Main sample: • Child earnings at 35-36 years old • Parent earnings while children are 12-13 years old • 1974-1978 birth cohorts and their parents ~ 308k children • When utilizing Bagrut data: • 1980-1981 birth cohorts and their parents ~ 127k pairs • Child earnings while 32 to 33 years old • Parent earnings while children are 15 to 16 years old

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Oren Heller – orenh@nioi.gov.il

Intergenerational Mobility in Israel

Rank Results

Parents' Rank Constant

Observations R-squared

Average

Males

Females

0.251 (0.00173)

0.254 (0.00250)

0.251 (0.00225)

0.391 (0.00100)

0.454 (0.00144)

0.324 (0.00130)

308,429 0.064

156,364 0.062

152,065 0.076

Sample: 1974-1978 cohorts Robustness tests: Lifecycle; Attenuation

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Oren Heller – orenh@nioi.gov.il

Intergenerational Mobility in Israel

Rank Results Parents' Rank Controlling for children’s + education Constant

Observations

0.185

0.0942

(0.00277)

(0.00294) YES

0.451

0.449

(0.00168)

(0.00231)

120,507

112,228

0.036 0.079 R-squared Sample: 1980-1981 cohorts + matriculation achievements & higher education attendance length and type

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Intergenerational Mobility in Israel

Results - Rank

Local-linear estimation; triangle kernel; bw: 0.15

Sample: 1974-1978 cohorts

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Intergenerational Mobility in Israel

Cross-Sectional Analysis

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Intergenerational Mobility in Israel

Periphery & School Quality Non-UltraOrthodox Jews (“general population”)

Arabs

Ultra-Orthodox (Haredim)

0.288***

0.303***

0.199*

Periphery

(0.0451) -0.0139***

(0.0999) -0.0104

(0.106) -0.00962

Parents' Rank X Periphery

(0.00339) 0.0132***

(0.00658) -0.0140

(0.00804) 0.00115

School Quality (Score)

(0.00431) 0.0523***

(0.0119) 0.0266***

(0.0150) 0.00507

Parents' Rank X School Quality Proxy

(0.00538) -0.0216**

(0.00729) 0.0562**

(0.00480) 0.00647

Constant

(0.00885) 0.393***

(0.0220) 0.254***

(0.00799) 0.317***

(0.0262)

(0.0427)

(0.0544)

87,196 0.031

13,691 0.086

6,116 0.019

Parents' Rank

Observations R-squared

Sample: 1980-1981 cohorts

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Intergenerational Mobility in Israel

Ethnicity

(1)

(2)

(3)

***0.119

0.304-

0.377-

(0.00309)

(0.296)

(0.291)

***0.190-

***0.101-

***0.124-

(0.00604)

(0.00877)

(0.0104)

0.00108-

0.0228-

0.0120

(0.0122)

(0.0168)

(0.0197)

***0.159-

***0.128-

***0.104-

(0.00431)

(0.0117)

(0.0134)

***0.148

***0.130

***0.117

(0.0101)

(0.0267)

(0.0290)

YES

YES

Parents' Rank

Ultra-Orthodox (Haredim) Parents' Rank X Ultra-Orthodox

Arabs Parents' Rank X Arabs :Controlling for Localities & school quality proxies (including interactions with parents' rank) Education: matriculation achievements & higher education attendance

YES

Constant

***0.512

***0.880

***0.845

Sample: 1980-1981 cohorts

(0.00197)

(0.157)

(0.155)

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Oren Heller – orenh@nioi.gov.il

Intergenerational Mobility in Israel

Ethnicity

• • •

Each dot stands for parents’ earnings percentile of ethnic group Sample: 1974-1978 cohorts (males) Resemblance to Mazumder’s (2012) analysis of blacks’ vs. whites’ IGE

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Oren Heller – orenh@nioi.gov.il

Intergenerational Mobility in Israel

Cross-Country Comparison Great Gatsby Curve 0.80 0.70

0.67

0.60

0.60 0.50

0.50 0.46 IGE

0.34 0.30

0.15

0.18 0.17

0.47

0.49

0.52

0.44

0.40 0.28

0.32

0.29 0.26 0.22

0.27

0.20

0.32

0.19 0.11

0.10 0.00 20.00

0.46

0.41

0.40

0.50

25.00

30.00

35.00

40.00 Gini

45.00

50.00

55.00

60.00

Apart from Israel, IGE estimates are from Corak (2016). Gini coefficients are the averages values of households’ disposable income Gini coefficients which are available between the years 1997-2001 as published by the World Bank.

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Oren Heller – orenh@nioi.gov.il

Intergenerational Mobility in Israel

Immigration

Total Immigrants Immigrant's Children Immigrant's Grandchildren Natives

Parents Rank 0.562 (0.279) 0.547 (0.278) 0.543 (0.273)

Absolute Mobility 0.517

90,806

0.590

0.538

2,782

(0.285) 0.597 (0.287)

0.538

Estimate

N

0.156 (0.00204) 0.179 (0.0119) 0.166 (0.00273)

235,987

0.133 (0.00325) 0.139 (0.0187)

7,344 135,833

Sample: non-Haredim Jews; 1974-1978 cohorts

0.502 0.505

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Oren Heller – orenh@nioi.gov.il

Intergenerational Mobility in Israel

Immigration

Parents' Rank Immigrants or Immigrants' children Immigrants or Immigrants' children X Parents' Rank Continent of Origin Controls Sub-Districts & Periphery Level Controls Constant

Observations R-squared Standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 Sample: non-Haredim Jews; 1974-1978 cohorts

(1)

(2)

(3)

0.133*** (0.00318) -0.0414*** (0.00265) 0.0332*** (0.00416)

0.131*** (0.00364) -0.0313*** (0.00278) 0.0248*** (0.00437) YES

0.504*** (0.00209)

0.507*** (0.00238)

0.140*** (0.0130) -0.0255*** (0.00303) 0.0192*** (0.00469) YES YES 0.479*** (0.00829)

235,987 0.026

235,987 0.028

213,783 0.033

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Oren Heller – orenh@nioi.gov.il

Intergenerational Mobility in Israel

Family Origins Parents' Rank

Africa

Africa X Parents' Rank

West Asia

West Asia X Parents' Rank

West Europe

West Europe X Parents' Rank

East Europe

East Europe X Parents' Rank

North America

0.136***

0.131***

***0.0749

(0.00454)

(0.0201)

(0.00454)

-0.0391***

-0.0307***

***0.0253-

(0.00682)

(0.00693)

(0.00666)

0.0217*

0.0160

***0.0289

(0.0112)

(0.0114)

(0.0110)

-0.0237***

-0.0266***

*0.0119-

(0.00713)

(0.00715)

(0.00696)

0.00912

0.0144

0.0129

(0.0118)

(0.0119)

(0.0115)

0.0343***

0.0337***

0.00912

(0.0129)

(0.0129)

(0.0126)

-0.0399**

-0.0400**

0.0190-

(0.0181)

(0.0181)

(0.0176)

0.0341***

0.0323***

0.00861

(0.00809)

(0.00811)

(0.00790)

-0.0282**

-0.0275**

0.00845-

(0.0112)

(0.0112)

(0.0109)

0.0368

0.0380

0.00320-

(0.0309)

(0.0309)

(0.0301)

Sample: 1974-1978 cohorts; Only natives: Excluding immigrants and their children; General 0.0499 Jewish-Population

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Oren Heller â&#x20AC;&#x201C; orenh@nioi.gov.il

Intergenerational Mobility in Israel

Cross-Country Comparison Great Gatsby Curve 0.80 0.70

0.67

0.60

0.60 0.50

0.50 0.46 IGE

0.41

0.40 0.34 0.30

0.32 0.27

0.20 0.15

0.50

0.46

0.47

0.49

0.52

0.44

0.40

0.29 0.26 0.22 0.19 0.190.23

0.32

0.18 0.17

0.10 0.00 20.00

25.00

30.00

35.00

40.00 Gini

45.00

50.00

55.00

60.00

Apart from Israel, IGE estimates are from Corak (2016). Gini coefficients are the averages values of householdsâ&#x20AC;&#x2122; disposable income Gini coefficients which are available between the years 1997-2001 as published by the World Bank.

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Intergenerational Mobility in Israel

Oren Heller – orenh@nioi.gov.il

Summary & Conclusions • Estimated intergenerational mobility (IGE=0.276) seems to be too high.

• Ethnic segmentation reduces mobility • High proportion of immigrants reduces mobility

=> Excluding these effects, mobility is even higher • Mandatory military service ?

• Arabs are less mobile mainly due to less equal opportunities in labor market • Lower earnings and mobility in periphery • Needed policy measures regarding transportation

• Two generations after immigration, family origin are correlated with the

given opportunities

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Oren Heller â&#x20AC;&#x201C; orenh@nioi.gov.il

Intergenerational Mobility in Israel

Thank You