Intergenerational Mobility in the Land of Inequality

In the main analysis, we measure the income of children born in 1988-1990 in the period 2015-2019, when they are 25-31 years old, and relate it to the income of their parents at the time when children were 3-18 years old.20 For both children and parents, we focus on the average annual income throughout the measurement period. [...] In particular, we focus on the chances of escaping poverty – defined as the probability that children born to parents in the bottom quintile do not belong to the same quintile when adults –, and on the probability that children move from the bottom to the top quintile of the income distribution within one generation (Corak and Heisz, 1999). [...] 4 Income mobility at the national level 4.1 IGM estimates Figure 3 plots the average and median income rank in adulthood for children born to parents in each percentile of the parental income distribution, along with the inter- quartile range (i.e., the range between the 25th and 75th percentiles of the children’s income distribution). [...] In turn, roughly half of the children born in the bottom fail to escape poverty, remaining at the bottom, and half of the children born in the top remain at the top. [...] This is the case because the minimum wage is binding in the bottom part of the distribution and because omitting capital income contributes to flattening the curve in the upper half of the distribution.