Intergenerational Mobility of Earnings in Israel Tslil Aloni & Zeev Krill JUNE 2017
The Data Core sample of 288,483 observations of 79’-82’cohorts Earnings:
Individuals monthly wages for employees and self-employed for the years 2011-2014
4 years of earnings
Children ages in the main sample are 29-35
Parents’ gross yearly earnings (the sum of both parents’ salary income) At age 24 and at age 20 (starting from the year 1999) i.e. parents are 50 on average
Two Adjustments • Adjustment #1 – Mazumder (2015) • Based on the discussion between Chetty et al. and Mazumder • Mazumder evaluates the bias in Chetty et al. (2014b) to be a factor of 1/1.7
• Adjustment #2 – Corak (2006, 2016) • International comparisons adjusting for the selected estimate for the US.
Intergenerational Mobility Estimates (1-elasticity) 0.85 0.85 0.75 0.75
0.83 0.83 0.77 0.77
0.72 0.72 0.72 0.72
0.65 0.65 0.55 0.55 0.45 0.45 0.35 0.35 0.25 0.25
Sources: IGE estimates from Corak (2016) and Oren Heller (2017)
Intergenerational Elasticity
The Great Gatsby Curve 0.7
0.6
0.5
0.4
0.3
0.2
0.1 20
25
30
35
40
45
50
55
60
65
Gini Coefficient
Notes: HH net income Gini coefficients from the World Bank Data in 1997, otherwise the earliest available after 1997. Fitted line includes the Corak-adjusted estimate. Gini coefficients definitions may vary across countries due to data limitations, as detailed in the Gini index metadata provided by the World Bank. Sources: IGE estimates from Corak (2016), Gini coefficients from the World Bank Data, as used in Corak (2016).
Descriptive Statistics – Immigrants and Natives
Parent's average rank (exc. zeros) Children's average rank (exc. zeros) Father's years of education Mother's years of education
Natives
Immigrants
50 48
47 52
11.9 11.4
12.4 12.2
% from Former Soviet Union 2% % from European/American countries 17% % from North-African/Asian countries 32% % from Ethiopia 0% % with Israeli Grandparents 17% % Arabs 25% % Orthodox 6.7% Number of kids in the family* 3.9 % Of individuals with no income data 21% Number of observations 225,347 * Total number of siblings when the child is 17 years of age.
42% 15% 35% 4% 0% 0% 4.3% 2.9 23% 138,868
Omitting the immigrants from the sample – a substantial increase in mobility Natives and Natives
Immigrants
Immigrants
IGE
0.195
0.166
0.133
Rank-Rank Correlation
0.279
0.238
0.21
Number of Observations
189,746
288,483
98,737
All results significantly differ from one another with a confidence level of 99%. All on core samples, 1979-1982 cohorts with positive income average in 2011-2014 and positive parents’ income.
Intergenerational Elasticity
The Great Gatsby Curve 0.7
0.6
0.5
0.4
0.3
0.2
0.1 20
25
30
35
40
45
Gini Coefficient
50
55
60
65
Immigrant families display higher upward mobility
Probability of outranking parents (full sample)
Mean rank from 24th to 26th percentiles Observations Mean rank from 1st quartile (excluding zeros) Mean earnings in 1st quartile Percentage reaching top 1 pct. Percentage reaching top 5 pct. Percentage reaching top 10 pct. Percentage reaching top 25 pct. Percentage reaching top 50 pct. Observations in 1st quartile (exc. zeros)
Natives
Immigrants
46%
55%
43
47
(27.2) 5,383
(27.2)
40
45
(27) 36,404
(27.3) 34,750
0.31%
0.36%
2.13%
2.79%
4.35%
5.87%
14.00%
18.11%
35.81%
43.07%
44,187
27,934
3,271
Transition Matrix – international comparison Child Earnings Quintile
1st
2nd Parents Earnings Quintile
3rd
4th
5th
1st
2nd
3rd
4th
5th
27.7
25.3
20.3
16.3
10.5
(-6)
(-2.7)
(1.9)
(4)
(3)
23.3
23.0
21.1
19.0
13.7
(-0.9)
(-1.2)
(-0.6)
(1.4)
(1.4)
18.8
20.2
21.3
21.5
18.2
(1)
(0.4)
(-0.8)
(-0.5)
(-0.1)
16.1
17.1
20.2
22.4
24.1
(2.7)
(1.1)
(-0.7)
(-2)
(-1.3)
14.2
14.4
17.2
20.8
33.5
(3.3)
(2.5)
(0.2)
(-2.8)
(-3)
US
Denmark
Canada
7.5
11.7
13.4
Note: in parenthesis are the differences from the corresponding table in Chetty et al. (2014b)
Appendix figure 7: Earning Deciles of Sons Born to Bottom Decile Parents: Israel and Canada
18 16
Israel
14
Canada
12 10 8 6 4 2 0
Bottom
2nd
Source: Canada from Corak 2013
3rd
4th
5th
6th
7th
8th
9th
Top
Appendix figure 9: Interdecile P90/P10, Ratio, 2014 or latest available
8 7 6 5 4 3 2 1 0
Source: OECD data
5.9 4.4
Upward Mobility – Country of Origin Comparison Israel
Asia / N. Africa
Euro. / America
FSU
Ethiopia
Arab
Mean rank from 24th to 26th percentiles Observations
45.9 (28.6) 798
46.9 (27.4) 3,002
45.5 (28.2) 919
47.7 (26.7) 1,601
41.6 (24.9) 135
38.4 (26.0) 2,199
Percentage reaching top 5 pct. Percentage reaching top 10 pct. Percentage reaching top 25 pct. Percentage reaching top 50 pct.
3.5%
2.6%
3.7%
3.0%
0.4%
1.2%
6.8%
5.7%
7.0%
6.0%
1.2%
2.6%
18.2%
17.6%
18.2%
18.0%
9.0%
9.5%
40.6%
41.6%
40.4%
42.2%
34.2%
29.0%
Observations in 1st quartile 5,566 23,466 25th percentile average yearly income is 66,700 NIS Standard deviations are in parenthesis.
6,867
12,980
2,279
20,963
Probability of outranking parents by quantiles
Note: Each dot is the proportion of the quantile to have a children’s rank higher than parents’, on the core sample.
Probability Gap of outranking parents between selected groups and general population
Note: Population excludes FSU and Arab population. Line indicates the 95% confidence intervals.
Country of Origin Comparison
Results
Variable
Parents-Child Rank Difference (1)
(2)
Israel
-8.6***
(0.21)
Euro. / America
-11.16***
(0.18)
FSU
7.3***
(0.19)
Ethiopia
20.6***
(0.61)
Arab
8.7***
(0.20)
Constant
0.55***
(0.11)
Notes: Standard errors in parentheses. Base group is of families with Asia / N. Africa origins. Clustered by ethnic groups
Parents’ rank FE
NO
Results
Variable
Israel Euro. / America FSU Ethiopia Arab Constant Parents’ rank FE R-Squared Observations
Parents-Child Rank Difference (1)
(2)
***
-8.6 (0.21) -11.16*** (0.18) 7.3*** (0.19) 20.6*** (0.61) 8.7*** (0.20)
-0.4*** (0.06) -0.28** (0.08) 2.81*** (0.08) -3.18*** (0.33) -6.21*** (0.16)
0.55*** (0.11)
0.61*** (0.09)
NO
YES
0.045 288,483
0.385 288,483
Notes: Standard errors in parentheses. Base group is of families with Asia / N. Africa origins. Clustered by ethnic groups