Intergenerational income immobility in Finland: contrasting roles for parental earnings and family income

Robert Lucas and Sari Pekkala Kerr

Journal of Population Economics, 2013, vol. 26, issue 3, 1057-1094

Abstract: An intergenerational model is developed, nesting heritable earning abilities and credit constraints limiting human capital investments in children. Estimates on a large, Finnish data panel indicate very low transmission from parental earnings, suggesting that the parameter of inherited earning ability is tiny. Family income, particularly during the phase of educating children, is shown to be much more important in shaping children’s lifetime earnings. This influence of parental incomes on children’s earnings rises as the children age because the returns to education rise. Despite Finland’s well-developed welfare state, persistence in economic status across generations is much higher than previously thought. Copyright Springer-Verlag 2013

Keywords: Intergenerational explanations panel; J62; J13; I21 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (16)

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DOI: 10.1007/s00148-012-0442-8

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